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A  Draft  Agreement 

between  the  Government  of  the 

United  Kingdom  of  Great  Britain  and  Northern  Ireland 

and  the 

Government  of  the  People's  RepubUc  of  China 

on  the  Future  of  Hong  Kong 


pam 
JQ672 
A2  H66 


26  September  1984 


This  White  Paper 

reproduces  the  text  of  the  White  Paper 

published  by  Her  Majesty's  Government  in  London 

on  26  September  1984 


TABLE  OF  CONTENTS 


cf^ 


Page 

Introduction 1 

Joint  Declaration  11 

Annex  I  to  the  Joint  Declaration:  Elaboration  by  the  Government 
of  the  People's  Republic  of  China  of  its  Basic  Policies  regarding 

Hong  Kong  14 

Annex  II  to  the  Joint  Declaration:  Sino-British  Joint  Liaison  Group  26 

Annex  III  to  the  Joint  Declaration:  Land  Leases  28 

Exchange  of  Memoranda 31 

Explanatory  Notes 35 


INTRODUCTION 

1.  On  26  September  1984  representatives  of  the  Governments  of  the  United 
Kingdom  and  of  the  People's  Republic  of  China  initialled  the  draft  text  of 
an  agreement  on  the  future  of  Hong  Kong.  The  agreement,  contained  in  the 
second  part  of  this  White  Paper,  consists  of  a  Joint  Declaration  and  three 
Annexes.  There  is  an  associated  Exchange  of  Memoranda.  These  documents 
are  the  outcome  of  two  years  of  negotiations  between  the  two  Governments, 
undertaken  with  the  common  aim  of  maintaining  the  stability  and  prosperity  of 
Hong  Kong. 

2.  The  purpose  of  this  White  Paper  is  to  explain  the  background  to  the  last  two 
years'  negotiations  and  their  course,  and  to  present  the  documents  in  their 
proper  context.  The  text  of  this  White  Paper  is  also  being  published  in  Hong 
Kong  by  the  Hong  Kong  Government,  and  the  people  of  Hong  Kong  are  being 
invited  to  comment  on  the  overall  acceptability  of  the  arrangements  which  it 
describes.  Thereafter  the  matter  will  be  debated  in  Parliament. 

History 

3.  During  the  nineteenth  century  Britain  concluded  three  treaties  with  the  then 
Chinese  Government  relating  to  Hong  Kong:  the  Treaty  of  Nanking^  signed 
in  1842  and  ratified  in  1843  under  which  Hong  Kong  Island  was  ceded  in 
perpetuity;  the  Convention  of  Peking^  in  1860  under  which  the  southern  part  of 
the  Kowloon  peninsula  and  Stonecutters  Island  were  ceded  in  perpetuity;  the 
Convention  of  1898^  under  which  the  New  Territories  (comprising  92  per  cent 
of  the  total  land  area  of  the  territory)  were  leased  to  Britain  for  99  years  from 
1  July  1898.  It  was  the  fact  that  the  New  Territories  are  subject  to  a  lease  with 
a  fixed  expiry  date  which  lay  behind  the  decision  by  Her  Majesty's  Government 
to  seek  to  enter  negotiations  with  the  Government  of  the  People's  Republic  of 
China  (referred  to  hereafter  as  "the  Chinese  Government")  on  Hong  Kong's 
future. 

4.  The  Chinese  Government  has  consistently  taken  the  view  that  the  whole  of 
Hong  Kong  is  Chinese  territory.  Its  position  for  many  years  was  that  the 
question  of  Hong  Kong  came  into  the  category  of  unequal  treaties  left  over 
from  history;  that  it  should  be  settled  peacefully  through  negotiations  when 
conditions  were  ripe;  and  that  pending  a  settlement  the  status  quo  should  be 
maintained.  The  Chinese  Government  made  its  view  of  Hong  Kong's  status 
clear  in  a  letter  to  the  Chairman  of  the  United  Nations  Special  Committee  on 
the  Situation  with  regard  to  the  Implementation  of  the  Declaration  on  the 
Granting  of  Independence  to  Colonial  Countries  and  Peoples  in  March  1972. 
This  maintained  that  the  settlement  of  the  question  of  Hong  Kong  was  a  matter 
of  China's  sovereign  right  and  that  consequently  Hong  Kong  should  not  be 


'     British  State  Papers  Vol.  30.  p.  389 
British  State  Papers  Vol.  50,  p.  10 
British  State  Papers  Vol.  90,  p.  17 


2 


included  in  the  list  of  colonial  territories  covered  by  the  Declaration  on  the 
Granting  of  Independence  to  Colonial  Countries  and  Peoples. 

The  Background  to  the  Negotiations 

5.  In  the  late  1970's,  as  the  period  before  the  termination  of  the  New  Territories 
lease  continued  to  shorten,  concern  about  the  future  of  Hong  Kong  began  to  be 
expressed  both  in  the  territory  itself  and  among  foreign  investors.  In  particular 
there  was  increasing  realisation  of  the  problem  posed  by  individual  land  leases 
granted  in  the  New  Territories,  all  of  which  are  set  to  expire  three  days  before 
the  expiry  of  the  New  Territories  lease  in  1997.  It  was  clear  that  the  steadily 
shortening  span  of  these  leases  and  the  inability  of  the  Hong  Kong  Government 
to  grant  new  ones  extending  beyond  1997  would  be  likely  to  deter  investment 
and  damage  confidence. 

6.  Her  Majesty's  Government  had  by  this  time,  following  a  detailed  examina- 
tion of  the  problem  conducted  in  consultation  with  the  then  Governor, 
concluded  that  confidence  would  begin  to  erode  quickly  in  the  early  to 
mid-1980"s  if  nothing  was  done  to  alleviate  the  uncertainty  caused  by  the  1997 
deadline.  Accordingly,  when  the  Governor  of  Hong  Kong  visited  Peking  in 
March  1979  at  the  invitation  of  the  Chinese  Minister  of  Foreign  Trade,  an 
attempt  was  made,  on  the  initiative  of  Her  Majesty's  Government,  to  solve  the 
specific  question  of  land  leases  expiring  in  1997.  These  discussions  did  not  result 
in  measures  to  solve  the  problem. 

7.  In  the  course  of  the  next  two  years  there  was  increasing  awareness  of  the  need 
to  remove  the  uncertainty  which  the  1997  deadline  generated.  The  importance 
of  the  issue  was  publicly  stressed  by  the  senior  Unofficial  Member  of  the 
Executive  Council  in  May  1982.  In  January  1982  Sir  (then  Mr)  Humphrey 
Atkins,  Lord  Privy  Seal,  visited  Peking  and  was  given  significant  indications  of 
Chinese  policy  towards  Hong  Kong  by  Chinese  leaders,  which  confirmed  the 
view  of  Her  Majesty's  Government  that  negotiations  should  be  opened  with  the 
Chinese  Government. 

The  Prime  Minister's  Visit  to  China 

8.  Against  this  background  Her  Majesty's  Government  decided  that  the  Prime 
Minister's  visit  to  China  in  September  1982  would  provide  an  opportunity  to 
open  discussions  with  the  Chinese  Government  on  the  future  of  Hong  Kong.  It 
was  evident  that  the  Chinese  Government  had  reached  the  same  conclusion,  and 
substantive  discussions  took  place  during  the  visit.  Following  a  meeting 
between  the  Prime  Minister  and  Chairman  Deng  Xiaoping  on  24  September 
1982  the  following  joint  statement  was  issued: 

"Today  the  leaders  of  both  countries  held  far-reaching  talks  in  a  friendly  atmosphere 
on  the  future  of  Hong  Kong.  Both  leaders  made  clear  their  respective  positions  on  this 
subject. 

They  agreed  to  enter  talks  through  diplomatic  channels  following  the  visit 
with  the  common  aim  of  maintaining  the  stability  and  prosperity  of  Hong  Kong." 


The  Course  of  the  Negotiations 

9.  The  Prime  Minister's  visit  was  followed  by  the  first  phase  of  negotiations 
conducted  by  Her  Majesty's  Ambassador  in  Peking  and  the  Chinese  Foreign 
Ministry.  These  consisted  of  exchanges  between  the  two  sides  on  the  basis  on 
which  the  negotiations  would  be  conducted,  and  on  the  agenda.  On  1  July  1983 
it  was  announced  that  the  second  phase  of  the  talks  would  begin  in  Peking  on 
12  July.  The  pattern  of  negotiation  in  the  second  phase,  which  was  continued 
until  the  end  of  the  negotiations,  was  for  foiTnal  rounds  of  talks  to  be  held 
between  delegations  led  by  Her  Majesty's  Ambassador  in  Peking  and  a  Vice  or 
Assistant  Minister  of  the  Chinese  Foreign  Ministry,  supplemented  as  necessary 
by  informal  contacts  between  the  two  delegations.  The  Governor  of  Hong  Kong 
took  part  in  every  round  of  formal  talks  as  a  member  of  the  British  delegation. 

10.  In  the  course  of  the  negotiations  Her  Majesty's  Government  explained  in 
detail  the  systems  which  prevail  in  Hong  Kong  and  the  importance  for  these 
systems  of  the  British  administrative  role  and  link.  Following  extensive  dis- 
cussion, however,  it  became  clear  that  the  continuation  of  British  administration 
after  1997  would  not  be  acceptable  to  China  in  any  form.  After  full  consultation 
with  the  Governor  and  the  Executive  Council  of  Hong  Kong.  Her  Majesty's 
Government  therefore  proposed  that  the  two  sides  discuss  on  a  conditional 
basis  what  effective  measures  other  than  continued  British  administration 
might  be  devised  to  maintain  the  stability  and  prosperity  of  Hong  Kong  and 
explore  further  the  Chinese  ideas  about  the  future  which  had  at  that  stage  been 
explained  to  them,  in  order  to  see  whether  on  this  basis  arrangements  which 
would  ensure  lasting  stability  and  prosperity  for  Hong  Kong  could  be 
constructed.  The  Chinese  Government  was  told  that,  if  this  process  was 
successful.  Her  Majesty's  Government  would  consider  recommending  to 
Parliament  a  bilateral  agreement  enshrining  the  arrangements.  Her  Majesty's 
Government  also  undertook  in  this  event  to  assist  in  the  implementation  of  such 
arrangements.  Following  this,  Her  Majesty's  Government  sought  to  explore 
with  the  Chinese  Government  the  implications  of  the  Chinese  Government's 
concept  of  Hong  Kong  as  a  Special  Administrative  Region  of  the  People's 
Republic  of  China.  In  response,  the  Chinese  side  further  elaborated  its  policies 
and  ideas. 

11.  In  April  1984  the  two  sides  completed  initial  discussion  of  these  matters. 
There  were  a  number  of  outstanding  unresolved  points,  but  it  was  by  then  clear 
that  an  acceptable  basis  for  an  agreement  might  be  possible.  At  the  invitation  of 
the  Chinese  Government  the  Secretary  of  State  for  Foreign  and  Commonwealth 
Affairs  visited  Peking  from  15  to  18  April.  During  his  meetings  with  Chinese 
leaders  the  two  sides  reviewed  the  course  of  the  talks  on  the  future  of  Hong 
Kong,  and  further  progress  was  made.  In  Hong  Kong  on  20  April  Sir  Geoffrey 
Howe  made  a  statement  on  the  approach  of  Her  Majesty's  Government  to  the 
negotiations.  He  said  that  it  would  not  be  realistic  to  think  of  an  agreement  that 
provided  for  continued  British  administration  in  Hong  Kong  after  1997:  for 
that  reason  Her  Majesty's  Government  had  been  examining  with  the  Chinese 


Government  how  it  might  be  possible  to  arrive  at  arrangements  that  would 
secure  for  Hong  Kong,  after  1997,  a  high  degree  of  autonomy  under  Chinese 
sovereignty,  and  that  would  preserve  the  way  of  life  in  Hong  Kong,  together 
with  the  essentials  of  the  present  systems.  He  made  it  clear  that  Her  Majesty's 
Government  were  working  for  a  framework  of  arrangements  that  would 
provide  for  the  maintenance  of  Hong  Kong's  flourishing  and  dynamic  society, 
and  an  agreement  in  which  such  arrrangements  would  be  forma];\  set  out. 

12.  After  Sir  Geoffrey  Howe's  visit  in  April  1984  negotiations  continued.  A 
working  group  was  established  on  21  June  1984  to  meet  full-time  in  Peking 
and  consider  documents  tabled  by  both  sides.  From  27  to  31  July  1984  the 
Secretary  of  State  for  Foreign  and  Commonwealth  Affairs  again  visited  Peking. 
The  visit  was  devoted  almost  entirely  to  the  future  of  Hong  Kong.  Sir  Geoffrey 
Howe  announced  in  Hong  Kong  on  1  August  that  very  substantial  progress  had 
been  m"de  towards  agreement  on  the  form  and  content  of  documents  which 
would  set  out  arrangements  for  Hong  Kong's  future  with  clarity  and  precision, 
in  legally  binding  form. 

13.  Sir  Geoffrey  also  announced  on  the  same  occasion  that  the  two  sides  had 
agreed  to  establish  a  Sino-British  Joint  Liaison  Group  which  would  come  into 
being  when  the  agreement  came  into  force  and  continue  until  the  year  2000.  It 
would  meet  in  Peking.  London  and  Hong  Kong.  It  was  agreed  that  the  Group 
would  not  be  an  organ  of  power.  Its  functions  would  be:  liaison,  consultation  on 
the  implementation  of  the  agreement,  and  exchange  of  information.  It  was 
agreed  that  it  would  play  no  part  in  the  administration  of  Hong  Kong.  Her 
Majesty's  Government  would  continue  to  be  responsible  for  the  administration 
of  Hong  Kong  up  to  30  June  1997. 

14.  Following  Sir  Geoffrey  Howe's  visit  the  negotiations  continued  on  the 
remaining  unresolved  issues  and  three  further  rounds  of  plenary  talks  took 
place.  A  further  ad  hoc  working  group  was  established  in  Peking  on  24  August. 
By  18  September  negotiators  on  both  sides  had  approved  the  English  and 
Chinese  te.xts  of  the  documents  that  make  up  the  agreement  and  the  associated 
E.xchange  of  Memoranda.  These  were  submitted  to  British  Ministers  and 
Chinese  leaders  for  final  approval.  The  texts  were  initialled  by  the  two 
delegation  leaders  on  26  September. 

Consultation  with  the  People  of  Hong  Kong 

15.  From  the  beginning  of  the  negotiations  Her  Majesty's  Government  have 
been  conscious  that  the  negotiations  concerned  the  interests  and  future  of 
the  five  and  a  half  million  people  of  Hong  Kong.  It  has  been  the  consistent 
position  of  Her  Majesty's  Government  that  any  agreement  with  the  Chinese 
Government  on  the  future  of  the  territory  should  be  acceptable  to  the  people  of 
Hong  Kong  as  well  as  to  the  British  Parliament  and  the  Chinese  Government. 

16.  The  negotiations  had  to  be  conducted  on  a  basis  of  confidentiality.  This  was 
crucial  to  their  success,  but  the  maintenance  of  confidentialitv  also  caused  much 


concern  and  anxiety  among  the  people  of  Hong  Kong  who  were  understandably 
anxious  to  know  what  was  being  negotiated  for  their  future.  All  members  of  the 
Executive  Council,  as  the  Governor's  closest  advisers,  were  kept  fully  informed 
on  the  negotiations  and  consulted  on  a  continuing  basis  throughout  the  period. 
The  Unofficial  Members  of  the  Executive  and  Legislative  Councils  (UMELCO) 
provided  invaluable  advice  to  the  Governor  and  to  Ministers  on  the  course  of 
the  negotiations  and  on  the  attitude  of  the  people  of  Hong  Kong. 

17.  At  a  number  of  crucial  points  in  the  negotiations  the  Governor  and 
Unofficial  Members  of  the  Executive  Council  visited  London  for  consultations 
with  the  Prime  Minister  and  other  Ministers.  British  Ministers  also  paid  a  series 
of  visits  to  Hong  Kong,  to  consult  the  Governor,  the  Executive  Council  and  the 
Unofficial  Members  of  the  Executive  and  Legislative  Councils  and  to  keep  in 
touch  with  opinion  in  the  territory.  The  Secretary  of  State  for  Foreign  and 
Commonwealth  Affairs  was  able  to  describe  the  approach  of  Her  Majesty's 
Government  to  the  negotiations  in  his  statement  in  Hong  Kong  on  20  April 
1984,  and  to  fill  in  more  details  of  what  might  eventually  be  included  in  an 
agreement  in  a  further  statement  in  the  territory  on  1  August  1984.  In  the  course 
of  the  negotiations,  and  in  particular  since  the  statement  of  20  April,  numerous 
individuals  and  groups  in  Hong  Kong  have  made  specific  proposals  on  what 
should  be  included  in  an  eventual  agreement.  The  Legislative  Council  of  Hong 
Kong  has  debated  aspects  of  the  future  of  the  territory  on  a  number  of 
occasions.  Her  Majesty's  Government  have  paid  close  attention  to  these 
expressions  of  opinion  which  the  Hong  Kong  Government  have  relayed  to 
Ministers,  and  to  views  about  the  future  expressed  through  a  variety  of 
channels — by  and  through  UMELCO,  through  the  press,  through  individual 
communications  addressed  to  Her  Majesty's  Government  or  the  Hong  Kong 
Government.  In  this  way  Her  Majesty's  Government  have  sought  to  take  into 
account  the  views  of  the  people  of  Hong  Kong  to  the  maximum  extent  possible 
during  the  negotiations. 

18.  In  the  same  way  the  maintenance  of  confidentiality  has  made  the  task  of 
consulting  Parliament  on  the  negotiations  more  difficult.  Despite  this  there  were 
debates  on  Hong  Kong  in  October  and  November  1983  and  in  May  1984.  and 
part  of  the  Foreign  Affairs  Debate  in  March  1984  was  also  devoted  to  Hong 
Kong.  Members  of  Parliament  have  kept  in  close  touch  with  the  people  of  Hong 
Kong,  both  through  visits  to  the  territory  and  through  meetings  with  Hong 
Kong  delegations  visiting  the  United  Kingdom. 

Introduction  to  the  Agreement 

19.  The  full  text  of  the  draft  agreement  is  included  in  the  second  part  of  this 
White  Paper.  It  consists  of  a  Joint  Declaration  and  three  Annexes.  Each  part  of 
the  agreement  has  the  same  status.  The  whole  makes  up  a  formal  international 
agreement,  legally  binding  in  all  its  parts.  An  international  agreement  of  this 
kind  is  the  highest  form  of  commitment  between  two  sovereign  states. 


20.  The  Joint  Declaration  consists  in  part  of  linked  declarations  by  Her 
Majesty's  Government  and  the  Chinese  Government.  In  paragraph  1  the 
Chinese  Government  declares  that  it  will  resume  the  exercise  of  sovereignty  over 
Hong  Kong  on  1  July  1997.  In  paragraph  2  Her  Majesty's  Government  declare 
that  they  will  restore  Hong  Kong  to  the  Chinese  Government  from  that  date.  In 
paragraph  3  the  Chinese  Government  sets  out  its  policies  towards  Hong  Kong 
after  30  June  1997.  In  paragraph  4  the  two  Governments  jointly  declare  that 
Her  Majesty's  Government  will  remain  responsible  for  the  administration  of 
Hong  Kong  up  to  30  June  1997.  Paragraphs  5  and  6  deal  with  the  Joint  Liaison 
Group  and  land.  Paragraph  7  constitutes  the  important  link  between  the 
declarations  by  the  two  parties;  it  has  the  effect  of  making  the  Joint  Declaration 
and  the  Annexes  to  it  legally  binding  in  their  entirety  on  the  two  Governments. 
Paragraph  8  provides  for  the  agreement  to  enter  into  force  on  ratification. 
Ratification  will  take  place  before  30  June  1985. 

21.  The  agreement  sets  out  clearly  the  relationship  between  the  provisions 
which  it  contains  and  the  future  Basic  Law  of  the  Hong  Kong  Special 
Administrative  Region,  to  be  promulgated  by  the  National  People's  Congress 
of  the  People's  Republic  of  China.  Paragraph  3(12)  of  the  Joint  Declaration 
provides  that  the  basic  policies  in  the  Joint  Declaration  and  the  elaboration  of 
them  in  Annex  I  will  be  stipulated  in  the  Basic  Law.  They  will  remain 
unchanged  for  50  years. 

22.  Annex  I  contains  an  elaboration  of  Chinese  policies  for  the  Hong  Kong 
Special  Administrative  Region.  The  Annex  deals  in  detail  with  the  way  Hong 
Kong  will  work  after  1  July  1997.  and  describes  the  extent  of  the  autonomy  and 
continuity  which  will  prevail  then.  The  subjects  dealt  with  in  the  various 
sections  of  this  Annex  are: 

(I)  constitutional  arrangements  and  government  structure: 

(II)  the  laws; 

(III)  the  judicial  system; 

(IV)  the  public  service; 
(V)  the  financial  system; 

(VI)  the  economic  system  and  external  economic  relations; 
(VII)  the  monetary  system; 
(VIII)  shipping: 
(IX)  civil  aviation: 
(X)  culture  and  education; 
(XI)  external  relations; 
(XII)  defence,  security  and  public  order; 

(XIII)  rights  and  freedoms; 

(XIV)  right  of  abode,  travel  documents  and  immigration. 

23.  Annex  II  sets  out  the  provisions  concerning  the  establishment  of  a  Sino- 
British  Joint  Liaison  Group.  The  Joint  Liaison  Group  will  be  established  on  the 
entry  into  force  of  the  agreement  and  will  meet  in  Peking.  London  and  Hong 


Kong.  From  1  July  1988  it  will  be  based  in  Hong  Kong,  although  it  will 
also  continue  to  meet  in  Peking  and  London.  It  will  continue  its  work  until 
1  January  2000.  The  Annex  includes  terms  of  reference  which  clearly  indicate 
that  the  Group  will  be  a  forum  for  liaison  only  and  not  an  organ  of  power. 
It  will  neither  play  a  part  in  the  administration  of  Hong  Kong  nor  have  any 
supervisory  role. 

24.  Annex  III  deals  with  land  leases.  It  covers  leases  that  have  already  been 
issued  by  the  Hong  Kong  Government,  leases  to  be  issued  between  the  entry 
into  force  of  the  agreement  and  1997.  certain  financial  arrangements,  and 
arrangements  for  the  establishment  of  a  joint  Land  Commission. 

25.  Associated  with  the  agreement  is  a  separate  Exchange  of  Memoranda  on 
the  status  of  persons  after  30  June  1997  who  at  present  are  British  Dependent 
Territories  citizens,  and  related  issues.  The  Memoranda  will  be  formally 
exchanged  in  Peking  on  the  same  day  as  the  signature  of  the  Joint  Declaration. 

26.  The  last  part  of  this  White  Paper  contains  further  explanatory  notes  on  the 
text  of  the  Annexes  to  the  Joint  Declaration  and  the  Exchange  of  Memoranda. 

Views  of  Her  Majesty's  Government  on  the  Agreement 

27.  As  recorded  in  paragraph  10  above,  Her  Majesty's  Government  have 
sought  to  see  whether  on  the  basis  of  proposals  put  forward  by  the  Chinese 
Government  arrangements  could  be  constructed  which  would  ensure  lasting 
stability  and  prosperity  for  Hong  Kong.  They  have  negotiated  energetically  and 
they  believe  successfully  to  secure  an  agreement  which  meets  the  needs  and 
wishes  of  the  people  of  Hong  Kong.  The  negotiations  have  been  hard  and  long. 
Taking  the  agreement  as  a  whole  Her  Majesty's  Government  are  confident  that 
it  does  provide  a  framework  in  which  the  stability  and  prosperity  of  Hong  Kong 
can  be  maintained  after  1997  as  a  Special  Administrative  Region  of  the  People's 
Republic  of  China. 

28.  The  text  of  the  agreement  has  been  initialled  by  both  sides.  This  represents 
a  certification  by  the  negotiators  that  it  represents  accurately  the  outcome  of  the 
negotiations.  However,  as  is  normal  with  international  agreements  negotiated 
between  nations  there  is  no  realistic  possibility  of  amending  the  text.  The 
agreement  must  be  taken  as  a  whole. 

29.  Her  Majesty's  Government  have  a  duty  to  make  clear  beyond  any  pos- 
sibility of  misunderstanding  the  alternative  to  acceptance  of  the  agreement  set 
out  in  this  White  Paper.  In  their  view,  there  is  no  possibility  of  an  amended 
agreement.  The  alternative  to  acceptance  of  the  present  agreement  is  to  have  no 
agreement.  In  this  case  the  Chinese  Government  has  made  it  plain  that 
negotiations  could  not  be  reopened  and  that  it  would  publish  its  own  plan  for 
Hong  Kong.  There  is  no  guarantee  that  such  a  unilateral  plan  would  include 
all  the  elements  included  in  the  draft  agreement,  nor  would  it  have  the  same 
status  as  a  legally  binding  agreement  between  the  two  countries.  Whether  or  not 
there  is  an  agreement  between  Her  Majesty's  Government  and  the  Chinese 


Government  the  New  Territories  will  revert  to  China  on  1  July  1997  under  the 
terms  of  the  1898  Convention.  The  remainder  of  Hong  Kong  (Hong  Kong 
Island,  Kowloon  and  Stonecutters  Island)  would  not  be  viable  alone.  Hong 
Kong,  including  the  New  Territories,  has  since  1898  become  an  integral  whole 
and  Her  Majesty's  Government  are  satisfied  that  there  is  no  possibility  of 
dividing  the  New  Territories  which  revert  to  China  on  1  July  1997  from  the 
remainder.  The  choice  is  therefore  between  reversion  of  Hong  Kong  to  China 
under  agreed,  legally  binding  international  arrangements  or  reversion  to  China 
without  such  arrangements.  This  is  not  a  choice  which  Her  Majesty's  Govern- 
ment have  sought  to  impose  on  the  people  of  Hong  Kong.  It  is  a  choice  imposed 
by  the  facts  of  Hong  Kong's  history. 

30.  Her  Majesty's  Government  believe  that  the  agreement  is  a  good  one.  They 
strongly  commend  it  to  the  people  of  Hong  Kong  and  to  Parliament.  It  provides  a 
framework  in  which  Hong  Kong  as  a  Special  Administrative  Region  of  the 
People's  Republic  of  China  will  be  able  to  preserve  its  unique  economic  system 
and  way  of  life  after  1  July  1997.  The  agreement  preserves  Hong  Kong's 
familiar  legal  system  and  the  body  of  laws  in  force  in  Hong  Kong,  including  the 
common  law.  The  agreement  gives  Hong  Kong  a  high  degree  of  autonomy  in 
which  it  will  be  able  to  administer  itself  and  pass  its  own  legislation.  It  will 
enable  Hong  Kong  to  continue  to  decide  on  its  own  economic,  financial  and 
trade  policies,  and  to  participate  in  international  organisations  and  trade 
agreements  such  as  the  General  Agreement  on  Tariffs  and  Trade  (GATT).  Her 
Majesty's  Government  are  confident  that  the  agreement  provides  the  necessary 
assurances  about  Hong  Kong's  future  to  allow  the  territory  to  continue  to  flourish, 
and  to  maintain  its  unique  role  in  the  world  as  a  major  trading  and  financial  centre. 

The  Agreement  and  the  People  of  Hong  Kong 

31.  Her  Majesty's  Government  have  consistently  stated  that  an  agreement  on 
the  future  of  Hong  Kong  must  be  acceptable  to  the  people  of  Hong  Kong  as 
well  as  to  Parliament.  In  his  statement  on  20  April  1984  in  Hong  Kong  the 
Secretary  of  State  for  Foreign  and  Commonwealth  Affairs  stated  that  the 
people  of  Hong  Kong  would  need  to  have  time  to  express  their  views  on  the 
agreement,  before  it  was  debated  by  Parliament.  The  people  of  Hong  Kong  will 
now  have  this  opportunity. 

32.  The  text  of  this  White  Paper  is  also  being  published  in  Hong  Kong  by  the 
Hong  Kong  Government  and  will  be  circulated  through  a  wide  variety  of 
channels  in  the  territory.  An  Assessment  Office  has  been  set  up  in  Hong  Kong 
under  the  charge  of  a  senior  official  of  the  Hong  Kong  Government,  directly 
responsible  to  the  Governor.  This  office  will  provide  Her  Majesty's  Govern- 
ment and  Parliament  with  an  analysis  and  assessment  of  opinion  in  Hong  Kong 
on  the  draft  agreement.  Two  monitors.  Sir  Patrick  Nairne  and  Mr  Justice 
Simon  Li,  have  been  appointed  by  Her  Majesty's  Government  to  observe  the 
work  of  the  Assessment  Office  and  to  report  independently  to  the  Secretary  of 
State  for  Foreign  and  Commonwealth  Affairs  on  whether  they  are  satisfied  that 

8 


the  Assessment  Office  has  properly,  accurately  and  impartially  discharged  its 
duties.  In  the  light  of  these  two  reports  Her  Majesty's  Government  will  decide 
what  recommendation  to  make  to  Parliament. 

33.  The  people  of  Hong  Kong  are  now  invited  to  comment  on  the  overall 
acceptability  of  the  draft  agreement  on  Hong  Kong  negotiated  between  Her 
Majesty's  Government  and  the  Chinese  Government,  against  the  background 
set  out  in  this  White  Paper. 


JOINT  DECLARATION 

OF  THE  GOVERNMENT  OF  THE  UNITED  KINGDOM  OF 

GREAT  BRITAIN  AND  NORTHERN  IRELAND 

AND 

THE  GOVERNMENT  OF  THE  PEOPLE'S  REPUBLIC  OF  CHINA 

ON  THE  QUESTION  OF  HONG  KONG 


The  Government  of  the  United  Kingdom  of  Great  Britain  and  Northern 
Ireland  and  the  Government  of  the  People's  Republic  of  China  have  reviewed 
with  satisfaction  the  friendly  relations  existing  between  the  two  Governments 
and  peoples  in  recent  years  and  agreed  that  a  proper  negotiated  settlement  of 
the  question  of  Hong  Kong,  which  is  left  over  from  the  past,  is  conducive  to  the 
maintenance  of  the  prosperity  and  stability  of  Hong  Kong  and  to  the  further 
strengthening  and  development  of  the  relations  between  the  two  countries  on  a 
new  basis.  To  this  end.  they  have,  after  talks  between  the  delegations  of  the  two 
Governments,  agreed  to  declare  as  follows: 

1.  The  Government  of  the  People's  Republic  of  China  declares  that  to  recover 
the  Hong  Kong  area  (including  Hong  Kong  Island.  Kowloon  and  the  New 
Territories,  hereinafter  referred  to  as  Hong  Kong)  is  the  common  aspiration  of 
the  entire  Chinese  people,  and  that  it  has  decided  to  resume  the  exercise  of 
sovereignty  over  Hong  Kong  with  effect  from  1  July  1997. 

2.  The  Government  of  the  United  Kingdom  declares  that  it  will  restore  Hong 
Kong  to  the  People's  Republic  of  China  with  effect  from  1  July  1997. 

3.  The  Government  of  the  People's  Republic  of  China  declares  that  the 
basic  policies  of  the  People's  Republic  of  China  regarding  Hong  Kong  are 
as  follows: 

(1)  Upholding  national  unity  and  territorial  integrity  and  taking  account  of 
the  history  of  Hong  Kong  and  its  realities,  the  People's  Republic  of 
China  has  decided  to  establish,  in  accordance  with  the  provisions  of 
Article  31  of  the  Constitution  of  the  People's  Republic  of  China,  a  Hong 
Kong  Special  Administrative  Region  upon  resuming  the  exercise  of 
sovereignty  over  Hong  Kong. 

(2)  The  Hong  Kong  Special  Administrative  Region  will  be  directly  under  the 
authority  of  the  Central  People's  Government  of  the  People's  Republic 
of  China.  The  Hong  Kong  Special  Administrative  Region  will  enjoy  a 
high  degree  of  autonomy,  except  in  foreign  and  defence  affairs  which  are 
the  responsibilities  of  the  Central  People's  Government. 

(3)  The  Hong  Kong  Special  Administrative  Region  will  be  vested  with 
executive,  legislative  and  independent  judicial  power,  including  that  of 
final  adjudication.  The  laws  currently  in  force  in  Hong  Kong  will  remain 
basically  unchanged. 


(4)  The  Governmcni  o\'  the  Hong  Kong  Special  Administrative  Region  u  ill 
be  composed  of  local  inhabitants.  The  chief  executive  will  be  appointed 
by  the  Central  People's  Government  on  the  basis  of  the  results  of 
elections  or  consultations  to  be  held  locally.  Principal  officials  will  be 
nominated  by  the  chief  executive  of  the  Hong  Kong  Special  Admin- 
istrative Region  for  appointment  by  the  Central  People's  Government. 
Chinese  and  foreign  nationals  previously  working  in  the  public  and 
police  services  in  the  government  departments  of  Hong  Kong  may 
remain  in  employment.  British  and  other  foreign  nationals  may  also  be 
employed  to  serve  as  advisers  or  hold  certain  public  posts  in  government 
departments  of  the  Hong  Kong  Special  Administrative  Region. 

(5)  The  current  social  and  economic  systems  in  Hong  Kong  will  remain 
unchanged,  and  so  will  the  life-style.  Rights  and  freedoms,  including 
those  of  the  person,  of  speech,  of  the  press,  of  assembly,  of  association, 
of  travel,  of  movement,  of  correspondence,  of  strike,  of  choice  of 
occupation,  of  academic  research  and  of  religious  belief  will  be  ensured 
by  law  in  the  Hong  Kong  Special  Administrative  Region.  Private 
property,  ownership  of  enterprises,  legitimate  right  of  inheritance  and 
foreign  investment  will  be  protected  by  law. 

(6)  The  Hong  Kong  Special  Administrative  Region  will  retain  the  status  of  a 
free  port  and  a  separate  customs  territory. 

(7)  The  Hong  Kong  Special  Administrative  Region  will  retain  the  status  of 
an  international  financial  centre,  and  its  markets  for  foreign  exchange, 
gold,  securities  and  futures  will  continue.  There  will  be  free  flow  of 
capital.  The  Hong  Kong  dollar  will  continue  to  circulate  and  remain 
freely  convertible. 

(8)  The  Hong  Kong  Special  Administrative  Region  will  have  independent 
finances.  The  Central  People's  Government  will  not  levy  taxes  on  the 
Hong  Kong  Special  Administrative  Region. 

(9)  The  Hong  Kong  Special  Administrative  Region  may  establish  mutually 
beneficial  economic  relations  with  the  United  Kingdom  and  other  coun- 
tries, whose  economic  interests  in  Hong  Kong  will  be  given  due  regard. 

(10)  Using  the  name  of  "Hong  Kong.  China",  the  Hong  Kong  Special 
Administrative  Region  may  on  its  own  maintain  and  develop  economic 
and  cultural  relations  and  conclude  relevant  agreements  with  states, 
regions  and  relevant  international  organisations. 

The  Government  of  the  Hong  Kong  Special  Administrative  Region 
may  on  its  own  issue  travel  documents  for  entry  into  and  exit  from 
Hong  Kong. 

(11)  The  maintenance  of  public  order  in  the  Hong  Kong  Special  Admin- 
istrative Region  will  be  the  responsibility  of  the  Government  of  the  Hong 
Kong  Special  Administrative  Region. 

12 


(12)  The  above-stated  basic  policies  of  the  People's  Republic  of  China 
regarding  Hong  Kong  and  the  elaboration  of  them  in  Annex  I  to  this 
Joint  Declaration  will  be  stipulated,  in  a  Basic  Law  of  the  Hong  Kong 
Special  Administrative  Region  of  the  People's  Republic  of  China,  by  the 
National  People's  Congress  of  the  People's  Republic  of  China,  and  they 
will  remain  unchanged  for  50  years. 

4.  The  Government  of  the  United  Kingdom  and  the  Government  of  the 
People's  Republic  of  China  declare  that,  during  the  transitional  period  between 
the  date  of  the  entry  into  force  of  this  Joint  Declaration  and  30  June  1997,  the 
Government  of  the  United  Kingdom  will  be  responsible  for  the  administration 
of  Hong  Kong  with  the  object  of  maintaining  and  preserving  its  economic 
prosperity  and  social  stability;  and  that  the  Government  of  the  People's 
Republic  of  China  will  give  its  cooperation  in  this  connection. 

5.  The  Government  of  the  United  Kingdom  and  the  Government  of  the 
People's  Republic  of  China  declare  that,  in  order  to  ensure  a  smooth  transfer  of 
government  in  1997,  and  with  a  view  to  the  effective  implementation  of  this 
Joint  Declaration,  a  Sino-British  Joint  Liaison  Group  will  be  set  up  when  this 
Joint  Declaration  enters  into  force;  and  that  it  will  be  established  and  will 
function  in  accordance  with  the  provisions  of  Annex  II  to  this  Joint  Declaration. 

6.  The  Government  of  the  United  Kingdom  and  the  Government  of  the 
People's  Republic  of  China  declare  that  land  leases  in  Hong  Kong  and  other 
related  matters  will  be  dealt  with  in  accordance  with  the  provisions  of  Annex  III 
to  this  Joint  Declaration. 

7.  The  Government  of  the  United  Kingdom  and  the  Government  of  the 
People's  Republic  of  China  agree  to  implement  the  preceding  declarations  and 
the  Annexes  to  this  Joint  Declaration. 

8.  This  Joint  Declaration  is  subject  to  ratification  and  shall  enter  into  force  on 
the  date  of  the  exchange  of  instruments  of  ratification,  which  shall  take  place  in 
Beijing  before  30  June  1985.  This  Joint  Declaration  and  its  Annexes  shall  be 
equally  binding. 

Done  in  duplicate  at  Beijing  on  1984  in  the  English  and 

Chinese  languages,  both  texts  being  equally  authentic. 


For  the  For  the 

Government  of  the  United  Kingdom  Government  of  the 

of  Great  Britain  and  Northern  Ireland  People's  Republic  of  China 


13 


ANNEX  I 

ELABORATION  BY  THE  GOVERNMENT  OF 

THE  PEOPLE'S  REPl  BLK   OF  CHINA 

OF  ITS  BASIC   POLICIES  REGARDING  HONG  KONG 

The  Government  of  the  People's  Republic  of  China  elaborates  the  basic 
policies  of  the  People's  Republic  of  China  regarding  Hong  Kong  as  set  out  in 
paragraph  3  of  the  Joint  Declaration  of  the  Government  of  the  United 
Kingdom  of  Great  Britain  and  Northern  Ireland  and  the  Government  of  the 
People's  Republic  of  China  on  the  Question  of  Hong  Kong  as  follows: 


I 

The  Constitution  of  the  People's  Republic  of  China  stipulates  in  Article  31 
that  "the  state  may  establish  special  administrative  regions  when  necessary.  The 
systems  to  be  instituted  in  special  administrative  regions  shall  be  prescribed  by 
laws  enacted  by  the  National  People's  Congress  in  the  light  of  the  specific 
conditions."  In  accordance  with  this  Article,  the  People's  Republic  of  China 
shall,  upon  the  resumption  of  the  exercise  of  sovereignty  over  Hong  Kong  on  1 
July  1997,  establish  the  Hong  Kong  Special  Administrative  Region  of  the 
People's  Republic  of  China.  The  National  People's  Congress  of  the  People's 
Republic  of  China  shall  enact  and  promulgate  a  Basic  Law  of  the  Hong  Kong 
Special  Administrative  Region  of  the  People's  Republic  of  China  (hereinafter 
referred  to  as  the  Basic  Law)  in  accordance  with  the  Constitution  of  the  People's 
Republic  of  China,  stipulating  that  after  the  establishment  of  the  Hong  Kong 
Special  Administrative  Region  the  socialist  system  and  socialist  policies  shall 
not  be  practised  in  the  Hong  Kong  Special  Administrative  Region  and  that 
Hong  Kong's  previous  capitalist  system  and  life-style  shall  remain  unchanged 
for  50  years. 

The  Hong  Kong  Special  Administrative  Region  shall  be  directly  under  the 
authority  of  the  Central  People's  Government  of  the  People's  Republic  of 
China  and  shall  enjoy  a  high  degree  of  autonomy.  Except  for  foreign  and 
defence  affairs  which  are  the  responsibilities  of  the  Central  People's  Govern- 
ment, the  Hong  Kong  Special  Administrative  Region  shall  be  vested  with 
executive,  legislative  and  independent  judicial  power,  including  that  of  final 
adjudication.  The  Central  People's  Government  shall  authorise  the  Hong  Kong 
Special  Administrative  Region  to  conduct  on  its  own  those  external  affairs 
specified  in  Section  XI  of  this  Annex. 

The  government  and  legislature  of  the  Hong  Kong  Special  Administrative 
Region  shall  be  composed  of  local  inhabitants.  The  chief  executive  of  the 

14 


Hong  Kong  Special  Administrative  Region  shall  be  selected  by  election  or 
through  consultations  held  locally  and  be  appointed  by  the  Central  People's 
Government.  Principal  officials  (equivalent  to  Secretaries)  shall  be  nominated 
by  the  chief  executive  of  the  Hong  Kong  Special  Administrative  Region  and 
appointed  by  the  Central  People's  Government.  The  legislature  of  the  Hong 
Kong  Special  Administrative  Region  shall  be  constituted  by  elections.  The 
executive  authorities  shall  abide  by  the  law  and  shall  be  accountable  to  the 
legislature. 

In  addition  to  Chinese.  English  may  also  be  used  in  organs  of  government 
and  in  the  courts  in  the  Hong  Kong  Special  Administrative  Region. 

Apart  from  displaying  the  national  flag  and  national  emblem  of  the  People's 
Republic  of  China,  the  Hong  Kong  Special  Administrative  Region  may  use  a 
regional  flag  and  emblem  of  its  own. 


II 

After  the  estabHshment  of  the  Hong  Kong  Special  Administrative  Region, 
the  laws  previously  in  force  in  Hong  Kong  (i.e.  the  common  law,  rules  of  equity, 
ordinances,  subordinate  legislation  and  customary  law)  shall  be  maintained, 
save  for  any  that  contravene  the  Basic  Law  and  subject  to  any  amendment  by 
the  Hong  Kong  Special  Administrative  Region  legislature. 

The  legislative  power  of  the  Hong  Kong  Special  Administrative  Region  shall 
be  vested  in  the  legislature  of  the  Hong  Kong  Special  Administrative  Region. 
The  legislature  may  on  its  own  authority  enact  laws  in  accordance  with  the 
provisions  of  the  Basic  Law  and  legal  procedures,  and  report  them  to  the 
Standing  Committee  of  the  National  People's  Congress  for  the  record.  Laws 
enacted  by  the  legislature  which  are  in  accordance  with  the  Basic  Law  and  legal 
procedures  shall  be  regarded  as  valid. 

The  laws  of  the  Hong  Kong  Special  Administrative  Region  shall  be  the  Basic 
Law,  and  the  laws  previously  in  force  in  Hong  Kong  and  laws  enacted  by  the 
Hong  Kong  Special  Administrative  Region  legislature  as  above. 


Ill 

After  the  establishment  of  the  Hong  Kong  Special  Administrative  Region, 
the  judicial  system  previously  practised  in  Hong  Kong  shall  be  maintained 
except  for  those  changes  consequent  upon  the  vesting  in  the  courts  of  the  Hong 
Kong  Special  Administrative  Region  of  the  power  of  final  adjudication. 

15 


Judicial  power  in  the  Hong  Kong  Special  Administrative  Region  shall  be 
vested  in  the  courts  of  the  Hong  Kong  Special  Administrative  Region.  The 
courts  shall  exercise  judicial  power  independently  and  free  from  any  inter- 
ference. Members  of  the  judiciary  shall  be  immune  from  legal  action  in  respect 
of  their  judicial  functions.  The  courts  shall  decide  cases  in  accordance  with  the 
laws  of  the  Hong  Kong  Special  Administrative  Region  and  may  refer  to 
precedents  in  other  common  law  jurisdictions. 

Judges  of  the  Hong  Kong  Special  Administrative  Region  courts  shall  be 
appointed  by  the  chief  executive  of  the  Hong  Kong  Special  Administrative 
Region  acting  in  accordance  with  the  recommendation  of  an  independent 
commission  composed  of  local  judges,  persons  from  the  legal  profession  and 
other  eminent  persons.  Judges  shall  be  chosen  by  reference  to  their  judicial 
qualities  and  may  be  recruited  from  other  common  law  jurisdictions.  A  judge 
may  only  be  removed  for  inability  to  discharge  the  functions  of  his  office,  or  for 
misbehaviour,  by  the  chief  executive  of  the  Hong  Kong  Special  Administrative 
Region  acting  in  accordance  with  the  recommendation  of  a  tribunal  appointed 
by  the  chief  judge  of  the  court  of  final  appeal,  consisting  of  not  fewer  than  three 
local  judges.  Additionally,  the  appointment  or  removal  of  principal  judges  (i.e. 
those  of  the  highest  rank)  shall  be  made  by  the  chief  executive  with  the 
endorsement  of  the  Hong  Kong  Special  Administrative  Region  legislature  and 
reported  to  the  Standing  Committee  of  the  National  People's  Congress  for  the 
record.  The  system  of  appointment  and  removal  of  judicial  officers  other  than 
judges  shall  be  maintained. 

The  power  of  final  judgment  of  the  Hong  Kong  Special  Administrative 
Region  shall  be  vested  in  the  court  of  final  appeal  in  the  Hong  Kong  Special 
Administrative  Region,  which  may  as  required  invite  judges  from  other 
common  law  jurisdictions  to  sit  on  the  court  of  final  appeal. 

A  prosecuting  authority  of  the  Hong  Kong  Special  Administrative  Region 
shall  control  criminal  prosecutions  free  from  any  interference. 

On  the  basis  of  the  system  previously  operating  in  Hong  Kong,  the  Hong 
Kong  Special  Administrative  Region  Government  shall  on  its  own  make 
provision  for  local  lawyers  and  lawyers  from  outside  the  Hong  Kong  Special 
Administrative  Region  to  work  and  practise  in  the  Hong  Kong  Special 
Administrative  Region. 

The  Central  People's  Government  shall  assist  or  authorise  the  Hong  Kong 
Special  Administrative  Region  Government  to  make  appropriate  arrangements 
for  reciprocal  juridical  assistance  with  foreign  states. 


IV 

After  the  establishment  of  the  Hong  Kong  Special  Administrative  Region, 
public  servants  previously  serving  in  Hong  Kong  in  all  government  depart- 

16 


menls,  including  the  police  department,  and  members  of  the  judiciary  may  all 
remain  in  employment  and  continue  their  service  with  pay.  allowances,  benefits 
and  conditions  of  service  no  less  favourable  than  before.  The  Hong  Kong 
Special  Administrative  Region  Government  shall  pay  to  such  persons  who 
retire  or  complete  their  contracts,  as  well  as  to  those  who  have  retired  before 
1  July  1997,  or  to  their  dependants,  all  pensions,  gratuities,  allowances  and 
benefits  due  to  them  on  terms  no  less  favourable  than  before,  and  irrespective  of 
their  nationality  or  place  of  residence. 

The  Hong  Kong  Special  Administrative  Region  Government  may  employ 
British  and  other  foreign  nationals  previously  serving  in  the  public  service  in 
Hong  Kong,  and  may  recruit  British  and  other  foreign  nationals  holding 
permanent  identity  cards  of  the  Hong  Kong  Special  Administrative  Region  to 
serve  as  public  servants  at  all  levels,  except  as  heads  of  major  government 
departments  (corresponding  to  branches  or  departments  at  Secretary  level) 
including  the  police  department,  and  as  deputy  heads  of  some  of  those 
departments.  The  Hong  Kong  Special  Administrative  Region  Government  may 
also  employ  British  and  other  foreign  nationals  as  advisers  to  government 
departments  and.  when  there  is  a  need,  may  recruit  qualified  candidates  from 
outside  the  Hong  Kong  Special  Administrative  Region  to  professional  and 
technical  posts  in  government  departments.  The  above  shall  be  employed  only 
in  their  individual  capacities  and.  like  other  public  servants,  shall  be  responsible 
to  the  Hong  Kong  Special  Administrative  Region  Government. 

The  appointment  and  promotion  of  public  servants  shall  be  on  the  basis 
of  qualifications,  experience  and  ability.  Hong  Kong's  previous  system  of 
recruitment,  employment,  assessment,  discipline,  training  and  management  for 
the  public  service  (including  special  bodies  for  appointment,  pay  and  conditions 
of  service)  shall,  save  for  any  provisions  providing  privileged  treatment  for 
foreign  nationals,  be  maintained. 


The  Hong  Kong  Special  Administrative  Region  shall  deal  on  its  own  with 
financial  matters,  including  disposing  of  its  financial  resources  and  drawing  up 
its  budgets  and  its  final  accounts.  The  Hong  Kong  Special  Administrative 
Region  shall  report  its  budgets  and  final  accounts  to  the  Central  People's 
Government  for  the  record. 

The  Central  People's  Government  shall  not  levy  taxes  on  the  Hong  Kong 
Special  Administrative  Region.  The  Hong  Kong  Special  Administrative  Region 
shall  use  its  financial  revenues  exclusively  for  its  own  purposes  and  they  shall 
not  be  handed  over  to  the  Central  People's  Government.  The  systems  by  which 
taxation  and  public  expenditure  must  be  approved  by  the  legislature,  and  by 
which  there  is  accountability  to  the  legislature  for  all  public  expenditure,  and 
the  system  for  auditing  public  accounts  shall  be  maintained. 

17 


VI 

The  Hong  Kong  Special  Administrative  Region  shall  maintain  the  capitalist 
economic  and  trade  systems  previously  practised  in  Hong  Kong.  The  Hong 
Kong  Special  Administrative  Region  Government  shall  decide  its  economic 
and  trade  policies  on  its  own.  Rights  concerning  the  ownership  of  property, 
including  those  relating  to  acquisition,  use.  disposal,  inheritance  and  compensa- 
tion for  lawful  deprivation  (corresponding  to  the  real  value  of  the  property 
concerned,  freely  convertible  and  paid  without  undue  delay)  shall  continue  to  be 
protected  by  law. 

The  Hong  Kong  Special  .Administrative  Region  shall  retain  the  status  of  a 
free  port  and  continue  a  free  trade  policy,  including  the  free  movement  of  goods 
and  capital.  The  Hong  Kong  Special  Administrative  Region  may  on  its  own 
maintain  and  develop  economic  and  trade  relations  with  all  states  and  regions. 

The  Hong  Kong  Special  Administrative  Region  shall  be  a  separate  customs 
territory.  It  may  participate  in  rele\ant  international  organisations  and  inter- 
national trade  agreements  (including  preferential  trade  arrangements),  such  as 
the  General  Agreement  on  Tariffs  and  Trade  and  arrangements  regarding 
international  trade  in  textiles.  Export  quotas,  tariff  preferences  and  other 
similar  arrangements  obtained  by  the  Hong  Kong  Special  Administrative 
Region  shall  be  enjoyed  exclusively  by  the  Hong  Kong  Special  Administrative 
Region.  The  Hong  Kong  Special  Administrative  Region  shall  have  authority  to 
issue  its  own  certificates  of  origin  for  products  manufactured  locally,  in 
accordance  with  prevailing  rules  of  origin. 

The  Hong  Kong  Special  Administrative  Region  may,  as  necessary,  establish 
official  and  semi-official  economic  and  trade  missions  in  foreign  countries, 
reporting  the  establishment  of  such  missions  to  the  Central  People's  Govern- 
ment for  the  record. 


VII 

The  Hong  Kong  Special  Administrative  Region  shall  retain  the  status  of  an 
international  financial  centre.  The  monetary  and  financial  systems  previously 
practised  in  Hong  Kong,  including  the  systems  oi'  regulation  and  supervision 
of  deposit  taking  institutions  and  financial  markets,  shall  be  maintained. 

The  Hong  Kong  Special  Administrative  Region  Government  may  decide  its 
monetary  and  financial  policies  on  its  own.  It  shall  safeguard  the  free  operation 
of  financial  business  and  the  free  flow  of  capital  within,  into  and  out  of  the 
Hong  Kong  Special  Administrative  Region.  No  exchange  control  policy  shall 
be  applied  in  the  Hong  Kong  Special  Administrative  Region.  Markets  for 
foreign  exchange,  gold,  securities  and  futures  shall  continue. 

18 


The  Hong  Kong  dollar,  as  the  local  legal  tender,  shall  continue  to  circulate 
and  remain  freely  convertible.  The  authority  to  issue  Hong  Kong  currency 
shall  be  vested  in  the  Hong  Kong  Special  Administrative  Region  Government. 
The  Hong  Kong  Special  Administrative  Region  Government  may  authorise 
designated  banks  to  issue  or  continue  to  issue  Hong  Kong  currency  under 
statutory  authority,  after  satisfying  itself  that  any  issue  of  currency  will  be 
soundly  based  and  that  the  arrangements  for  such  issue  are  consistent  with  The 
object  of  maintaining  the  stability  of  the  currency.  Hong  Kong  currency  bearing 
references  inappropriate  to  the  status  of  Hong  Kong  as  a  Special  Administrative 
Region  of  the  People's  Republic  of  China  shall  be  progressively  replaced  and 
withdrawn  from  circulation. 

The  Exchange  Fund  shall  be  managed  and  controlled  by  the  Hong  Kong 
Special  Administrative  Region  Government,  primarily  for  regulating  the  ex- 
change value  of  the  Hong  Kong  dollar. 


VIII 

The  Hong  Kong  Special  Administrative  Region  shall  maintain  Hong  Kong's 
previous  systems  of  shipping  management  and  shipping  regulation,  including 
the  system  for  regulating  conditions  of  seamen.  The  specific  functions  and 
responsibilities  of  the  Hong  Kong  Special  Administrative  Region  Government 
in  the  field  of  shipping  shall  be  defined  by  the  Hong  Kong  Special  Adminis- 
trative Region  Government  on  its  own.  Private  shipping  businesses  and 
shipping-related  businesses  and  private  container  terminals  in  Hong  Kong  may 
continue  to  operate  freely. 

The  Hong  Kong  Special  Administrative  Region  shall  be  authorised  by  the 
Central  People's  Government  to  continue  to  maintain  a  shipping  register  and 
issue  related  certificates  under  its  own  legislation  in  the  name  of  "Hong  Kong, 
China". 

With  the  exception  of  foreign  warships,  access  for  which  requires  the 
permission  of  the  Central  People's  Government,  ships  shall  enjoy  access  to  the 
ports  of  the  Hong  Kong  Special  Administrative  Region  in  accordance  with  the 
laws  of  the  Hong  Kong  Special  Administrative  Region. 


IX 

The  Hong  Kong  Special  Administrative  Region  shall  maintain  the  status 
of  Hong  Kong  as  a  centre  of  international  and  regional  aviation.  Airlines 
incorporated  and  having  their  principal  place  of  business  in  Hong  Kong  and 
civil  aviation  related  businesses  may  continue  to  operate.  The  Hong  Kong 
Special  Administrative   Region  shall  continue  the  previous  system  of  civil 

19 


aviation  management  in  Hong  Kong,  and  keep  its  own  aircraft  register  in 
accordance  with  provisions  laid  down  by  the  Central  People's  Government 
concerning  nationality  marks  and  registration  marks  of  aircraft.  The  Hong 
Kong  Special  Administrative  Region  shall  be  responsible  on  its  own  for  matters 
of  routine  business  and  technical  management  of  civil  aviation,  including  the 
management  of  airports,  the  provision  of  air  trallic  services  within  the  flight 
information  region  of  the  Hong  Kong  Special  Administrative  Region,  and  the 
discharge  of  other  responsibilities  allocated  under  the  regional  air  navigation 
procedures  of  the  International  Civil  Aviation  Organisation. 

The  Central  People's  Government  shall,  in  consultation  with  the  Hong  Kong 
Special  Administrative  Region  Government,  make  arrangements  providing  for 
air  services  between  the  Hong  Kong  Special  Administrative  Region  and  other 
parts  of  the  People's  Republic  of  China  for  airlines  incorporated  and  having 
their  principal  place  of  business  in  the  Hong  Kong  Special  Administrative 
Region  and  other  airlines  of  the  People's  Republic  of  China.  All  Air  Service 
Agreements  providing  for  air  services  between  other  parts  of  the  People's 
Republic  of  China  and  other  states  and  regions  with  stops  at  the  Hong  Kong 
Special  Administrative  Region  and  air  services  between  the  Hong  Kong  Special 
Administrative  Region  and  other  states  and  regions  with  stops  at  other  parts  of 
the  People's  Republic  of  China  shall  be  concluded  by  the  Central  People's 
Government.  For  this  purpose,  the  Central  People's  Government  shall  take 
account  of  the  special  conditions  and  economic  interests  of  the  Hong  Kong 
Special  Administrative  Region  and  consult  the  Hong  Kong  Special  Adminis- 
trative Region  Government.  Representatives  of  the  Hong  Kong  Special 
Administrative  Region  Government  may  participate  as  members  of  delegations 
of  the  Government  of  the  People's  Republic  of  China  in  air  service  consultations 
with  foreign  governments  concerning  arrangements  for  such  services. 

Acting  under  specific  authorisations  from  the  Central  People's  Government, 
the  Hong  Kong  Special  Administrative  Region  Government  may: 

-  renew  or  amend  Air  Service  Agreements  and  arrangements  previously  in 
force;  in  principle,  all  such  Agreements  and  arrangements  may  be  renewed 
or  amended  with  the  rights  contained  in  such  previous  Agreements  and 
arrangements  being  as  far  as  possible  maintained; 

-  negotiate  and  conclude  new  Air  Service  Agreements  providing  routes  for 
airlines  incorporated  and  having  their  principal  place  of  business  in  the 
Hong  Kong  Special  Administrative  Region  and  rights  for  overflights  and 
technical  stops;  and 

-  negotiate  and  conclude  provisional  arrangements  where  no  Air  Service 
Agreement  with  a  foreign  state  or  other  region  is  in  force. 

All  scheduled  air  services  to,  from  or  through  the  Hong  Kong  Special  Adminis- 
trative Region  which  do  not  operate  to.  from  or  through  the  mainland  of 
China  shall  be  regulated  by  Air  Service  Agreements  or  provisional  arrangements 
referred  to  in  this  paragraph. 

20 


The  Central  People's  Government  shall  give  the  Hong  Kong  Special  Adminis- 
trative Region  Government  the  authority  to: 

-  negotiate  and  conclude  with  other  authorities  all  arrangements  concerning 
the  implementation  of  the  above  Air  Service  Agreements  and  provisional 
arrangements; 

-  issue  licences  to  airlines  incorporated  and  having  their  principal  place  of 
business  in  the  Hong  Kong  Special  Administrative  Region; 

-  designate  such  airlines  under  the  above  Air  Service  Agreements  and 
provisional  arrangements;  and 

-  issue  permits  to  foreign  airlines  for  services  other  than  those  to.  from  or 
through  the  mainland  of  China. 


The  Hong  Kong  Special  Administrative  Region  shall  maintain  the  educa- 
tional system  previously  practised  in  Hong  Kong.  The  Hong  Kong  Special 
Administrative  Region  Government  shall  on  its  own  decide  policies  in  the  fields 
of  culture,  education,  science  and  technology,  including  policies  regarding  the 
educational  system  and  its  administration,  the  language  of  instruction,  the 
allocation  of  funds,  the  examination  system,  the  system  of  academic  awards  and 
the  recognition  of  educational  and  technological  qualifications.  Institutions  of 
all  kinds,  including  those  run  by  religious  and  community  organisations,  may 
retain  their  autonomy.  They  may  continue  to  recruit  staff  and  use  teaching 
materials  from  outside  the  Hong  Kong  Special  Administrative  Region.  Students 
shall  enjoy  freedom  of  choice  of  education  and  freedom  to  pursue  their 
education  outside  the  Hong  Kong  Special  Administrative  Region. 


XI 


Subject  to  the  principle  that  foreign  affairs  are  the  responsibility  of  the 
Central  People's  Government,  representatives  of  the  Hong  Kong  Special 
Administrative  Region  Government  may  participate,  as  members  of  delegations 
of  the  Government  of  the  People's  Republic  of  China,  in  negotiations  at  the 
diplomatic  level  directly  affecting  the  Hong  Kong  Special  Administrative  Region 
conducted  by  the  Central  People's  Government.  The  Hong  Kong  Special 
Administrative  Region  may  on  its  own,  using  the  name  "Hong  Kong.  China", 
maintain  and  develop  relations  and  conclude  and  implement  agreements  with 
states,  regions  and  relevant  international  organisations  in  the  appropriate  fields, 

21 


including  ihc  economic,  trade,  linancial  and  nionclary.  shipping,  communica- 
tions, touristic,  cultural  and  sporting  fields.  Representatives  of  the  Hong  Kong 
Special  Administrative  Region  Government  may  participate,  as  members  of 
delegations  of  the  Government  of  the  People's  Republic  of  China,  in  interna- 
tional organisations  or  conferences  in  appropriate  fields  limited  to  slates  and 
affecting  the  Hong  Kong  Special  Adminislrali\c  Region,  or  may  attend  in  such 
other  capacity  as  may  be  permitted  by  the  Central  People's  Government  and  the 
organisation  or  conference  concerned,  and  may  express  their  views  in  the  name 
of  "Hong  Kong.  China".  The  Hong  Kong  Special  Administrative  Region  may, 
using  the  name  "Hong  Kong.  China",  participate  in  international  organisations 
and  conferences  not  limited  to  states. 

The  application  to  the  Hong  Kong  Special  Administrative  Region  of  interna- 
tional agreements  to  which  the  People'sRcpublic  of  China  is  or  becomes  a  party 
shall  be  decided  by  the  Central  People's  Government,  in  accordance  with  the 
circumstances  and  needs  of  the  Hong  Kong  Special  Administrative  Region,  and 
after  seeking  the  views  of  the  Hong  Kong  Special  Administrative  Region 
Government.  International  agreements  to  which  the  People's  Republic  of  China 
is  not  a  party  but  which  are  implemented  in  Hong  Kong  may  remain 
implemented  in  the  Hong  Kong  Special  Administrative  Region.  The  Central 
People's  Government  shall,  as  necessary,  authorise  or  assist  the  Hong  Kong 
Special  Administrative  Region  Government  to  make  appropriate  arrangements 
for  the  application  to  the  Hong  Kong  Special  Administrative  Region  of  other 
relevant  international  agreements.  The  Central  People's  Government  shall  take 
the  necessary  steps  to  ensure  that  the  Hong  Kong  Special  Administrative 
Region  shall  continue  to  retain  its  status  in  an  appropriate  capacity  in  those 
international  organisations  of  which  the  People's  Republic  of  China  is  a  member 
and  in  which  Hong  Kong  participates  in  one  capacity  or  another.  The  Central 
People's  Government  shall,  where  necessary,  facilitate  the  continued  participa- 
tion of  the  Hong  Kong  Special  Administrative  Region  in  an  appropriate 
capacity  in  those  international  organisations  in  which  Hong  Kong  is  a  partici- 
pant in  one  capacity  or  another,  but  of  which  the  People's  Republic  of  China  is 
not  a  member. 

Foreign  consular  and  other  official  or  semi-official  missions  may  be  estab- 
lished in  the  Hong  Kong  Special  Administrative  Region  with  the  approval  of 
the  Central  People's  Government.  Consular  and  other  official  missions  estab- 
lished in  Hong  Kong  by  states  which  have  established  formal  diplomatic 
relations  with  the  People's  Republic  of  China  may  be  maintained.  According  to 
the  circumstances  of  each  case,  consular  and  other  official  missions  of  states 
having  no  formal  diplomatic  relations  with  the  People's  Republic  of  China 
may  either  be  maintained  or  changed  to  semi-official  missions.  States  not 
recognised  by  the  People's  Republic  of  China  can  only  establish  non-govern- 
mental institutions. 

The  United  Kingdom  may  establish  a  Consulate-General  in  the  Hong  Kong 
Special  Administrative  Region. 

22 


XII 

The  maintenance  of  public  order  in  the  Hong  Kong  Special  Administrative 
Region  shall  be  the  responsibility  of  the  Hong  Kong  Special  Administrative 
Region  Government.  Military  forces  sent  by  the  Central  People's  Government 
10  be  stationed  in  the  Hong  Kong  Special  Administrative  Region  for  the 
purpose  of  defence  shall  not  interfere  in  the  internal  affairs  of  the  Hong  Kong 
Special  Administrative  Region.  Expenditure  for  these  military  forces  shall  be 
borne  by  the  Central  People's  Government. 


XIII 

The  Hong  Kong  Special  Administrative  Region  Government  shall  protect  the 
rights  and  freedoms  of  inhabitants  and  other  persons  in  the  Hong  Kong  Special 
Administrative  Region  according  to  law.  The  Hong  Kong  Special  Administra- 
tive Region  Government  shall  maintain  the  rights  and  freedoms  as  provided  for 
by  the  laws  previously  in  force  in  Hong  Kong,  including  freedom  of  the  person, 
of  speech,  of  the  press,  of  assembly,  of  association,  to  form  and  join  trade 
unions,  of  correspondence,  of  travel,  of  movement,  of  strike,  of  demonstration. 
of  choice  of  occupation,  of  academic  research,  of  belief,  inviolability  of  the 
home,  the  freedom  to  marry  and  the  right  to  raise  a  family  freely. 

Every  person  shall  have  the  right  to  confidential  legal  advice,  access  to  the 
courts,  representation  in  the  courts  by  lawyers  of  his  choice,  and  to  obtain 
judicial  remedies.  Every  person  shall  have  the  right  to  challenge  the  actions  of 
the  executive  in  the  courts. 

Religious  organisations  and  believers  may  maintain  their  relations  with 
religious  organisations  and  believers  elsewhere,  and  schools,  hospitals  and 
welfare  institutions  run  by  religious  organisations  may  be  continued.  The 
relationship  between  religious  organisations  in  the  Hong  Kong  Special  Adminis- 
trative Region  and  those  in  other  parts  of  the  People's  Republic  of  China  shall 
be  based  on  the  principles  of  non-subordination,  non-interference  and  mutual 
respect. 

The  provisions  of  the  International  Covenant  on  Civil  and  Political  Rights 
and  the  International  Covenant  on  Economic.  Social  and  Cultural  Rights  as 
applied  to  Hong  Kong  shall  remain  in  force. 


XIV 

The  following  categories  of  persons  shall  have  the  right  of  abode  in  the  Hong 
Kong  Special  Administrative  Region,  and,  in  accordance  with  the  law  of  the 

23 


Hong  Kong  Special  Administrative  Region,  be  qualilied  to  obtain  permanent 
identity  cards  issued  by  the  Hong  Kong  Special  Administrative  Region  Govern- 
ment, which  state  their  right  of  abode: 

-  all  Chinese  nationals  who  were  born  or  who  have  ordinarily  resided  in 
Hong  Kong  before  or  after  the  establishment  of  the  Hong  Kong  Special 
Administrative  Region  for  a  continuous  period  of  7  years  or  more,  and 
persons  of  Chinese  nationality  born  outside  Hong  Kong  of  such  Chinese 
nationals; 

-  all  other  persons  who  have  ordinarily  resided  in  Hong  Kong  before  or 
after  the  establishment  of  the  Hong  Kong  Special  Administrative  Region 
for  a  continuous  period  of  7  years  or  more  and  who  have  taken  Hong 
Kong  as  their  place  of  permanent  residence  before  or  after  the  establish- 
ment of  the  Hong  Kong  Special  Administrative  Region,  and  persons 
under  21  years  of  age  who  were  born  of  such  persons  in  Hong  Kong 
before  or  after  the  establishment  of  the  Hong  Kong  Special  Administrative 
Region; 

-  any  other  persons  who  had  the  right  of  abode  only  in  Hong  Kong  before 
the  establishment  of  the  Hong  Kong  Special  Administrative  Region. 

The  Central  People's  Government  shall  authorise  the  Hong  Kong  Special 
Administrative  Region  Government  to  issue,  in  accordance  with  the  law, 
passports  of  the  Hong  Kong  Special  Administrative  Region  of  the  People's 
Republic  of  China  to  all  Chinese  nationals  who  hold  permanent  identity  cards 
of  the  Hong  Kong  Special  Administrative  Region,  and  travel  documents  of  the 
Hong  Kong  Special  Administrative  Region  of  the  People's  Republic  of  China  to 
all  other  persons  lawfully  residing  in  the  Hong  Kong  Special  Administrative 
Region.  The  above  passports  and  documents  shall  be  valid  for  all  states  and 
regions  and  shall  record  the  holder's  right  to  return  to  the  Hong  Kong  Special 
Administrative  Region. 

For  the  purpose  of  travelling  to  and  from  the  Hong  Kong  Special  Adminis- 
trative Region,  residents  of  the  Hong  Kong  Special  Administrative  Region  may 
use  travel  documents  issued  by  the  Hong  Kong  Special  Administrative  Region 
Government,  or  by  other  competent  authorities  of  the  People's  Republic  of 
China,  or  of  other  states.  Holders  of  permanent  identity  cards  of  the  Hong 
Kong  Special  Administrative  Region  may  have  this  fact  stated  in  their  travel 
documents  as  evidence  that  the  holders  have  the  right  of  abode  in  the  Hong 
Kong  Special  Administrative  Region. 

Entry  into  the  Hong  Kong  Special  Administrative  Region  of  persons  from 
other  parts  of  China  shall  continue  to  be  regulated  in  accordance  with  the 
present  practice. 

The  Hong  Kong  Special  Administrative  Region  Government  may  apply 
immigration  controls  on  entry,  stay  in  and  departure  from  the  Hong  Kong 
Special  Administrative  Region  by  persons  from  foreign  states  and  regions. 

24 


Unless  restrained  by  law,  holders  of  valid  travel  documents  shall  be  free 
to  leave  the  Hong  Kong  Special  Administrative  Region  without  special 
authorisation. 

The  Central  People's  Government  shall  assist  or  authorise  the  Hong  Kong 
Special  Administrative  Region  Government  to  conclude  visa  abolition  agree- 
ments with  states  or  regions. 


25 


ANNEX  II 
SINO-BRITISH  JOINT  LIAISON  CROLP 

1.  In  furtherance  of  their  common  aim  and  in  order  to  ensure  a  smooth  transfer 
of  government  in  1997.  the  Government  of  the  United  Kingdom  and  the 
Government  of  the  People's  Republic  of  China  have  agreed  to  continue  their 
discussions  in  a  friendly  spirit  and  to  develop  the  cooperative  relationship  which 
already  exists  between  the  two  Governments  over  Hong  Kong  with  a  view  to  the 
effective  implementation  of  the  Joint  Declaration. 

2.  In  order  to  meet  the  requirements  for  liaison,  consultation  and  the  exchange  of 
information,  the  two  Governments  have  agreed  to  set  up  a  Joint  Liaison  Group. 

3.  The  functions  of  the  Joint  Liaison  Group  shall  be: 

(a)  to  conduct  consultations  on  the  implementation  of  the  Joint  Declaration; 

(b)  to  discuss  matters  relating  to  the  smooth  transfer  of  government  in  1997: 

(c)  to  exchange  information  and  conduct  consultations  on  such  subjects  as 
may  be  agreed  by  the  two  sides. 

Matters  on  which  there  is  disagreement  in  the  Joint  Liaison  Group  shall  be 
referred  to  the  two  Governments  for  solution  through  consultations. 

4.  Matters  for  consideration  during  the  first  half  of  the  period  between  the 
establishment  of  the  Joint  Liaison  Group  and  1  July  1997  shall  include: 

(a)  action  to  be  taken  by  the  two  Governments  to  enable  the  Hong  Kong 
Special  Administrative  Region  to  maintain  its  economic  relations  as  a 
separate  customs  territory,  and  in  particular  to  ensure  the  maintenance 
of  Hong  Kong's  participation  in  the  General  Agreement  on  Tariffs  and 
Trade,  the  Multifibre  Arrangement  and  other  international  arrange- 
ments; and 

(b)  action  to  be  taken  by  the  two  Governments  to  ensure  the  continued 
application  of  international  rights  and  obligations  affecting  Hong  Kong. 

5.  The  two  Governments  have  agreed  that  in  the  second  half  of  the  period 
between  the  establishment  of  the  Joint  Liaison  Group  and  1  July  1997  there  will 
be  need  for  closer  cooperation,  which  will  therefore  be  intensified  during  that 
period.  Matters  for  consideration  during  this  second  period  shall  include: 

(a)  procedures  to  be  adopted  for  the  smooth  transition  in  1997: 

(b)  action  to  assist  the  Hong  Kong  Special  .Administrative  Region  to 
maintain  and  develop  economic  and  cultural  relations  and  conclude 
agreements  on  these  matters  with  states,  regions  and  relevant  interna- 
tional organisations. 

6.  The  Joint  Liaison  Group  shall  be  an  organ  for  liaison  and  not  an  organ  of 
power.  It  shall  play  no  part  in  the  administration  of  Hong  Kong  or  the  Hong 
Kong  Special  Administrative  Region.  Nor  shall  it  have  any  supervisory  role 

26 


over  that  administration.  The  members  and  supporting  staff  of  the  Joint  Liaison 
Group  shall  only  conduct  activities  within  the  scope  of  the  functions  of  the  Joint 
Liaison  Group. 

7.  Each  side  shall  designate  a  senior  representative,  who  shall  be  of  Ambass- 
adorial rank,  and  four  other  members  of  the  group.  Each  side  may  send  up  to 
20  supporting  staff. 

8.  The  Joint  Liaison  Group  shall  be  established  on  the  entry  into  force  of  the 
Joint  Declaration.  From  1  July  1988  the  Joint  Liaison  Group  shall  have  its 
principal  base  in  Hong  Kong.  The  Joint  Liaison  Group  shall  continue  its  work 
until  1  January  2000. 

9.  The  Joint  Liaison  Group  shall  meet  in  Beijing.  London  and  Hong  Kong.  It 
shall  meet  at  least  once  in  each  of  the  three  locations  in  each  year.  The  venue  for 
each  meeting  shall  be  agreed  between  the  two  sides. 

10.  Members  of  the  Joint  Liaison  Group  shall  enjoy  diplomatic  privileges  and 
immunities  as  appropriate  when  in  the  three  locations.  Proceedings  of  the  Joint 
Liaison  Group  shall  remain  confidential  unless  otherwise  agreed  between  the 
two  sides. 

1 1.  The  Joint  Liaison  Group  may  by  agreement  between  the  two  sides  decide  to 
set  up  specialist  sub-groups  to  deal  with  particular  subjects  requiring  expert 
assistance. 

12.  Meetings  of  the  Joint  Liaison  Group  and  sub-groups  may  be  attended  by 
experts  other  than  the  members  of  the  Joint  Liaison  Group.  Each  side  shall 
determine  the  composition  of  its  delegation  to  particular  meetings  of  the  Joint 
Liaison  Group  or  sub-group  in  accordance  with  the  subjects  to  be  discussed  and 
the  venue  chosen. 

13.  The  working  procedures  of  the  Joint  Liaison  Group  shall  be  discussed  and 
decided  upon  by  the  two  sides  within  the  guidelines  laid  down  in  this  Annex. 


27 


ANNEX  III 

LAND  LEASES 

The  Government  of  the  United  Kingdom  and  the  Government  of  the  People's 
Republic  of  China  have  agreed  that,  with  efTect  from  the  entry  into  force  of  the 
Joint  Declaration,  land  leases  in  Hong  Kong  and  other  related  matters  shall  be 
dealt  with  in  accordance  with  the  following  provisions: 

L  All  leases  of  land  granted  or  decided  upon  before  the  entry  into  force  of  the 
Joint  Declaration  and  those  granted  thereafter  in  accordance  with  paragraph 
2  or  3  of  this  Annex,  and  which  extend  beyond  30  June  1997.  and  all  rights  in 
relation  to  such  leases  shall  continue  to  be  recognised  and  protected  under  the 
law  of  the  Hong  Kong  Special  Administrative  Region. 

2.  All  leases  of  land  granted  by  the  British  Hong  Kong  Government  not 
containing  a  right  of  renewal  that  expire  before  30  June  1997,  except  short  term 
tenancies  and  leases  for  special  purposes,  may  be  extended  if  the  lessee  so  wishes 
for  a  period  expiring  not  later  than  30  June  2047  without  payment  of  an 
additional  premium.  An  annual  rent  shall  be  charged  from  the  date  of  extension 
equivalent  to  3  per  cent  of  the  rateable  value  of  the  property  at  that  date, 
adjusted  in  step  with  any  changes  in  the  rateable  value  thereafter.  In  the  case  of 
old  schedule  lots,  village  lots,  small  houses  and  similar  rural  holdings,  where  the 
property  was  on  30  June  1984  held  by,  or.  in  the  case  of  small  houses  granted 
after  that  date,  the  property  is  granted  to,  a  person  descended  through  the  male 
line  from  a  person  who  was  in  1898  a  resident  of  an  established  village  in  Hong 
Kong,  the  rent  shall  remain  unchanged  so  long  as  the  property  is  held  by  that 
person  or  by  one  of  his  lawful  successors  in  the  male  line.  Where  leases  of  land 
not  having  a  right  of  renewal  expire  after  30  June  1997,  they  shall  be  dealt  with 
in  accordance  with  the  relevant  land  laws  and  policies  of  the  Hong  Kong  Special 
Administrative  Region. 

3.  From  the  entry  into  force  of  the  Joint  Declaration  until  30  June  1997.  new 
leases  of  land  may  be  granted  by  the  British  Hong  Kong  Government  for  terms 
expiring  not  later  than  30  June  2047.  Such  leases  shall  be  granted  at  a  premium 
and  nominal  rental  until  30  June  1997,  after  which  date  they  shall  not  require 
payment  of  an  additional  premium  but  an  annual  rent  equivalent  to  3  per  cent 
of  the  rateable  value  of  the  property  at  that  date,  adjusted  in  step  with  changes 
in  the  rateable  value  thereafter,  shall  be  charged. 

4.  The  total  amount  of  new  land  to  be  granted  under  paragraph  3  of  this  Annex 
shall  be  limited  to  50  hectares  a  year  (excluding  land  to  be  granted  to  the  Hong 
Kong  Housing  Authority  for  public  rental  housing)  from  the  entry  into  force  of 
the  Joint  Declaration  until  30  June  1997. 

5.  Modifications  of  the  conditions  specified  in  leases  granted  by  the  British 
Hong  Kong  Government  may  continue  to  be  granted  before  1  July  1997  at  a 
premium  equivalent  to  the  difference  between  the  value  of  the  land  under  the 
previous  conditions  and  its  value  under  the  modified  conditions. 

28 


6.  From  the  entry  into  force  of  the  Joint  Declaration  until  30  June  1997, 
premium  income  obtained  by  the  British  Hong  Kong  Government  from  land 
transactions  shall,  after  deduction  of  the  average  cost  of  land  production,  be 
shared  equally  between  the  British  Hong  Kong  Government  and  the  future 
Hong  Kong  Special  Administrative  Region  Government.  All  the  income 
obtained  by  the  British  Hong  Kong  Government,  including  the  amount  of  the 
above  mentioned  deduction,  shall  be  put  into  the  Capital  Works  Reserve  Fund 
for  the  financing  of  land  development  and  public  works  in  Hong  Kong.  The 
Hong  Kong  Special  Administrative  Region  Government's  share  of  the  premium 
income  shall  be  deposited  in  banks  incorporated  in  Hong  Kong  and  shall  not  be 
drawn  on  except  for  the  financing  of  land  development  and  public  works  in 
Hong  Kong  in  accordance  with  the  provisions  of  paragraph  l{d)  of  this  Annex. 

7.  A  Land  Commission  shall  be  established  in  Hong  Kong  immediately  upon 
the  entry  into  force  of  the  Joint  Declaration.  The  Land  Commission  shall  be 
composed  of  an  equal  number  of  officials  designated  respectively  by  the 
Government  of  the  United  Kingdom  and  the  Government  of  the  People's 
Republic  of  China  together  with  necessary  supporting  staff.  The  officials  of  the 
two  sides  shall  be  responsible  to  their  respective  governments.  The  Land 
Commission  shall  be  dissolved  on  30  June  1997. 

The  terms  of  reference  of  the  Land  Commision  shall  be: 

(a)  to  conduct  consultations  on  the  implementation  of  this  Annex; 

(b)  to  monitor  observance  of  the  limit  specified  in  paragraph  4  of  this 
Annex,  the  amount  of  land  granted  to  the  Hong  Kong  Housing 
Authority  for  public  rental  housing,  and  the  division  and  use  of  premium 
income  referred  to  in  paragraph  6  of  this  Annex; 

(c)  to  consider  and  decide  on  proposals  from  the  British  Hong  Kong 
Government  for  increasing  the  limit  referred  to  in  paragraph  4  of  this 
Annex; 

(d)  to  examine  proposals  for  drawing  on  the  Hong  Kong  Special  Admin- 
istrative Region  Government's  share  of  premium  income  referred  to  in 
paragraph  6  of  this  Annex  and  to  make  recommendations  to  the  Chinese 
side  for  decision. 

Matters  on  which  there  is  disagreement  in  the  Land  Commission  shall  be 
referred  to  the  Government  of  the  United  Kingdom  and  the  Government  of  the 
People's  Republic  of  China  for  decision. 

8.  Specific  details  regarding  the  establishment  of  the  Land  Commission  shall  be 
finaHsed  separately  by  the  two  sides  through  consultations. 


29 


EXCHANGE  OF  MEMORANDA 
(A)  UNITED  KINGDOM  MEMORANDUM 

MEMORANDUM 

In  connection  with  the  Joint  Declaration  of  the  Government  of  the  United 
Kingdom  of  Great  Britain  and  Northern  Ireland  and  the  Government  of  the 
People's  Republic  of  China  on  the  question  of  Hong  Kong  to  be  signed  this 
day,  the  Government  of  the  United  Kindgom  declares  that,  subject  to  the 
completion  of  the  necessary  amendments  to  the  relevant  United  Kingdom 
legislation: 

(a)  All  persons  Vv'ho  on  30  June  1997  are,  by  virtue  of  a  connection  with 
Hong  Kong,  British  Dependent  Territories  citizens  (BDTCs)  under  the 
law  in  force  in  the  United  Kingdom  will  cease  to  be  BDTCs  with  effect 
from  1  July  1997,  but  will  be  eligible  to  retain  an  appropriate  status 
which,  without  conferring  the  right  of  abode  in  the  United  Kingdom, 
will  entitle  them,  to  continue  to  use  passports  issued  by  the  Government 
of  the  United  Kingdom.  This  status  will  be  acquired  by  such  persons 
only  if  they  hold  or  are  included  in  such  a  British  passport  issued  before 
1  July  1997,  except  that  eligible  persons  born  on  or  after  1  January  1997 
but  before  1  July  1997  may  obtain  or  be  included  in  such  a  passport  up 
to  31  December  1997. 

(b)  No  person  will  acquire  BDTC  status  on  or  after  1  July  1997  by  virtue 
of  a  connection  with  Hong  Kong.  No  person  born  on  or  after  1  July 
1997  will  acquire  the  status  referred  to  as  being  appropriate  in  sub- 
paragraph (a). 

(c)  United  Kingdom  consular  officials  in  the  Hong  Kong  Special  Adminis- 
trative Region  and  elsewhere  may  renew  and  replace  passports  of 
persons  mentioned  in  sub-paragraph  (a)  and  may  also  issue  them  to 
persons,  born  before  1  July  1997  of  such  persons,  who  had  previously 
been  included  in  the  passport  of  their  parent. 

(d)  Those  who  have  obtained  or  been  included  in  passports  issued  by  the 
Government  of  the  United  Kingdom  under  sub-paragraphs  (a)  and  (c) 
will  be  entitled  to  receive,  upon  request,  British  consular  services  and 
protection  when  in  third  countries. 


Beijing,  1984. 


31 


(B)  CHINESE  MEMORANDUM 
Translation 

MEMORANDUM 

The  Government  of  the  People's  Republic  of  China  has  received  the 
memorandum  from  the  Government  of  the  United  Kingdom  of  Great  Britain 
and  Northern  Ireland  dated 1 984. 

Under  the  Nationality  Law  of  the  People's  Republic  of  China,  all  Hong  Kong 
Chinese  compatriots,  whether  they  are  holders  of  the  "British  Dependent 
Territories  citizens'  Passport"  or  not,  are  Chinese  nationals. 

Taking  account  of  the  historical  background  of  Hong  Kong  and  its  realities, 
the  competent  authorities  of  the  Government  of  the  People's  Republic  of  China 
will,  with  effect  from  1  July  1997,  permit  Chinese  nationals  in  Hong  Kong  who 
were  previously  called  "British  Dependent  Territories  citizens"  to  use  travel 
documents  issued  by  the  Government  of  the  United  Kingdom  for  the  purpose 
of  travelling  to  other  states  and  regions. 

The  above  Chinese  nationals  will  not  be  entitled  to  British  consular  protection 
in  the  Hong  Kong  Special  Administrative  Region  and  other  parts  of  the 
People's  Republic  of  China  on  account  of  their  holding  the  above-mentioned 
British  travel  documents. 


Beijing,  1984. 


33 


EXPLANATORY  NOTES 

Introduction 

1.  The  following  notes  are  intended  to  explain  the  material  in  the  Annexes  to 
the  Joint  Declaration  and  in  the  associated  Exchange  of  Memoranda.  They  do 
not  seek  to  be  a  comprehensive  guide  and  do  not  include  every  point  in  the  texts. 
They  are  designed  to  explain  in  simple  terms,  and  to  illustrate  where  appro- 
priate, how  the  Annexes  provide  for  the  continuation  of  the  essentials  of  Hong 
Kong's  systems.  Hong  Kong  is  a  highly  developed  industrial,  commercial  and 
financial  centre  and  as  such  is  a  complex  place.  The  Hong  Kong  Government,  in 
consultation  with  Her  Majesty's  Government,  are  taking  steps  to  ensure  that 
further  guidance  and  answers  to  detailed  questions  will  be  provided  as  may  be 
necessary  and  appropriate. 

Annex  I:  Elaboration  by  the  Government  of  the  People's  Republic  of  China  of  its 
Basic  Policies  regarding  Hong  Kong 

Section  I:  Constitutional  Arrangements  and  Government  Structure 

2.  When  the  People's  Republic  of  China  resumes  the  exercise  of  sovereignty 
over  Hong  Kong  on  1  July  1997,  Hong  Kong  will  become  a  Special  Administra- 
tive Region  (SAR)  of  the  People's  Republic  of  China  with  a  high  degree  of 
autonomy.  A  Basic  Law  to  be  enacted  by  the  National  People's  Congress  of  the 
People's  Republic  of  China  will  become  the  constitutional  instrument  for  the 
Hong  Kong  SAR.  The  Letters  Patent  and  the  Royal  Instructions,  which  have 
hitherto  performed  this  function,  will  be  revoked.  As  paragraph  3(12)  of  the 
Joint  Declaration  makes  clear,  the  basic  policies  of  the  People's  Republic  of 
China  as  set  out  in  the  Joint  Declaration  and  elaborated  in  this  Annex  will  all  be 
stipulated  in  the  Basic  Law. 

3.  This  section  of  the  Annex  makes  clear  the  important  point  that  the  Basic 
Law  will  stipulate  that  the  socialist  system  and  socialist  policies  practised  in 
the  rest  of  the  People's  Republic  of  China  will  not  be  extended  to  the  Hong 
Kong  SAR  and  that  Hong  Kong's  capitalist  system  and  lifestyle  will  remain 
unchanged  for  50  years  after  the  establishment  of  the  SAR. 

4.  The  Annex  also  states  that,  except  in  relation  to  foreign  and  defence  affairs, 
which  are  now  the  overall  responsibility  of  Her  Majesty's  Government,  and  will 
with  effect  from  1  July  1997  become  the  overall  responsibility  of  the  Central 
People's  Government  of  the  People's  Republic  of  China,  the  Hong  Kong  SAR 
will  enjoy  a  high  degree  of  autonomy,  including  executive,  legislative  and 
independent  judicial  power.  The  SAR  will  also  have  authority  to  conduct  its 
own  external  affairs  in  appropriate  areas  (including  those  relating  to  economic, 
trade,  financial  and  monetary,  shipping,  communications,  touristic,  cultural 
and  sporting  matters)  as  amplified  in  section  XI  of  this  Annex,  which  deals  with 

35 


external  relations.  The  SAR  will  enjoy  a  significant  degree  of  autonomy  in  the 
maintenance  and  development  of  its  air  transport  system  as  set  out  in  section  IX 
of  this  Annex,  which  deals  with  civil  aviation. 

5.  The  section  of  the  Annex  which  deals  with  constitutional  arrangements  and 
government  structure  provides  that  the  Hong  Kong  SAR  will  be  under  the 
direct  authority  o\'  the  Central  People's  Government.  The  SAR  will  therefore 
not  be  under  the  authority  of  any  provincial  Government. 

6.  This  section  of  the  Annex  lays  down  the  main  elements  of  the  structure  of 
government  in  the  Hong  Kong  SAR.  It  also  states  thai  the  Government  and 
legislature  of  the  SAR  will  be  composed  of  local  inhabitants.  The  chief  execu- 
tive will  be  selected  by  election  or  through  consultations  held  locally  and  be 
appointed  by  the  Central  People's  Government.  Officials  of  the  rank  equivalent 
to  Secretaries  will  be  nominated  by  the  chief  executive  and  appointed  by  the 
Central  People's  Government.  The  legislature  will  be  elected. 

7.  Furthermore  the  Annex  indicates  that  the  executive  authorities  will  be 
required  to  act  in  accordance  with  the  law  and  will  be  accountable  to  the 
legislature;  that  both  Chinese  and  English  languages  may  be  used  in  govern- 
ment and  in  the  courts;  and  that,  apart  from  the  national  flag  and  national 
emblem  of  the  People's  Republic  of  China,  the  SAR  may  use  a  regional  flag 
and  emblem  of  its  own. 

Section  II:  The  Laws 

8.  This  section  of  the  Annex,  which  describes  how  the  Hong  Kong  SAR  will 
have  its  own  system  of  laws,  provides  continuity  of  Hong  Kong  law  beyond 
1997.  The  law  of  the  SAR  will  include  the  common  law  and  laws  passed  by  the 
legislature  of  the  SAR.  It  will  remain,  as  now.  capable  of  adapting  to  changing 
conditions  and  will  be  free  to  take  account  of  developments  in  the  common  law 
elsewhere.  That  this  is  so  is  reinforced  by  specific  provisions  in  section  III  of  this 
Annex  providing  that  the  courts  of  the  SAR  will  be  able  to  refer  to  precedents  in 
other  common  law  jurisdictions,  that  judges  of  the  SAR  may  be  recruited  from 
other  common  law  jurisdictions  and  that  the  SAR's  court  of  final  appeal  may 
invite  judges  from  other  common  law  jurisdictions  to  sit  on  it. 

9.  Hong  Kong  laws  and  those  enacted  after  1  July  1997  by  the  legislature  of  the 
Hong  Kong  SAR  will  be  valid  unless  they  contravene  the  Basic  Law.  The 
policies  stated  in  the  Joint  Declaration  and  in  this  Annex  will  be  stipulated  in 
the  Basic  Law. 

10.  Laws  enacted  in  the  Hong  Kong  SAR  will,  as  now.  have  to  be  passed  by  the 
legislature,  or  under  its  authority  in  the  form  of  delegated  legislation.  Such  laws 
may  amend  the  laws  of  Hong  Kong  carried  over  in  1997  so  long  as  the 
provisions  of  the  Basic  Law  are  not  transgressed.  After  enactment,  laws  will 
have  to  be  reported  to  the  Standing  Committee  of  the  National  People's 
Congress  of  the  People's  Republic  of  China  for  the  record. 

36 


Section  III:  The  Judicial  System 

11.  The  courts  of  Hong  Kong  consist  of  the  Supreme  Court,  the  District 
Courts,  the  Magistrates'  Courts,  and  various  statutory  tribunals.  The  courts  are 
at  the  heart  of  Hong  Kong's  legal  system,  which  plays  an  important  role  in 
maintaining  the  stability  and  prosperity  of  Hong  Kong.  The  Annex  contains  the 
very  important  provision  for  continuity  of  the  judicial  system. 

12.  The  Annex  indicates  that  the  main  change  in  the  judicial  system  which  will 
take  place  is  the  abolition  of  the  system  of  appeal  to  the  Privy  Council  and  the 
substitution  of  arrangements  for  the  final  adjudication  of  disputes  by  a  court  of 
the  Hong  Kong  SAR. 

13.  The  independent  exercise  of  judicial  power  and  the  obligation  of  the  courts 
to  decide  cases  in  accordance  with  the  law  are  both  provided  for  in  this  section 
of  the  Annex.  It  also  provides  that  the  appointment  of  judges  in  the  Hong  Kong 
SAR  will  be  subject  to  the  recommendation  of  an  independent  commission 
similar  to  the  existing  Judicial  Service  Commission.  The  independence  of  the 
judiciary  is  protected  by  the  provisions  that  judges  of  the  SAR  may  only  be 
removed  from  office  on  the  grounds  of  inability  or  misbehaviour,  and  then  only 
on  the  recommendation  of  a  tribunal  of  judges  of  the  SAR. 

14.  The  Annex  provides  that  the  essentials  of  the  system  of  appointment  and 
removal  of  judges  will  remain  unchanged,  but  the  appointment  and  removal  of 
judges  of  the  highest  rank  will  require  the  endorsement  of  the  legislature  of  the 
Hong  Kong  SAR  and  have  to  be  reported  for  the  record  to  the  Standing 
Committee  of  the  National  People's  Congress. 

15.  At  present  the  decision  whether  or  not  to  prosecute  in  any  particular  case  is 
the  responsibility  of  the  Attorney  General.  That  responsibility  is  exercised 
independently  free  from  government  interference.  The  Annex  provides  that  the 
responsibility  will  continue  to  be  exercised  in  the  SAR  in  the  same  independent 
way. 

16.  The  Annex  provides  that  local  lawyers  and  also  lawyers  from  outside  Hong 
Kong,  who  contribute  greatly  both  to  the  strength  of  the  present  legal  system 
and  to  the  success  of  Hong  Kong  as  a  commercial  and  financial  centre,  will 
continue  to  be  able  to  practise  law  in  Hong  Kong.  Provision  is  also  made 
to  enable  arrangements  to  be  continued  whereby,  for  example,  judgments 
obtained  in  Hong  Kong  may  be  enforced  in  foreign  states,  and  evidence  may 
be  obtained  overseas  for  use  in  proceedings  in  Hong  Kong. 

Section  IV:  The  Public  Service 

17.  This  section  of  the  Annex  provides  for  the  continuation  in  Hong  Kong  of 
an  impartial,  stable  and  effective  public  service.  This  is  an  essential  factor  in 
ensuring  Hong  Kong's  future  stability  and  prosperity. 

37 


18.  Under  the  provisions  of  this  section  of  the  Annex  serving  officers  will  be 
able  to  continue  in  employment  with  the  Hong  Kong  SAR  Government  on 
terms  and  conditions,  including  pay  and  pensions,  no  less  favourable  than 
before  1  July  1997.  Special  commissions  dealing  with  pay  and  conditions  of 
service  will  be  retained.  In  addition,  appointments  and  promotions  will  be  made 
on  the  recommendations  of  a  public  service  commission  and  on  the  basis  of 
qualifications,  experience  and  ability. 

19.  The  Annex  states  that  the  Hong  Kong  SAR  may  employ  foreign  nationals 
in  a  number  of  capacities,  namely  as  public  officers  (except  at  the  highest  levels), 
as  advisers  and  in  professional  and  technical  posts. 

20.  It  is  explicitly  provided  that  all  pensions  and  other  benefits  due  to  those 
officers  leaving  the  public  service  before  or  after  1  July  1997  or  to  their  depend- 
ants will  be  paid  by  the  Hong  Kong  SAR  Government. 

Section  V:  The  Financial  System 

21.  This  section  of  the  Annex  provides  for  continuity  in  that  the  Government  of 
the  Hong  Kong  SAR  will  determine  its  own  fiscal  policy  and  manage  and 
dispose  of  its  financial  resources,  in  accordance  with  Hong  Kong"s  own  needs. 
There  will  be  no  requirement  to  remit  revenue  to  the  Central  People's  Govern- 
ment. The  Annex  also  makes  clear  that  the  predominant  authority  of  the 
legislature  in  financial  matters,  and  the  system  for  independent  and  impartial 
audit  of  public  accounts,  will  continue  unchanged. 

Section  VI:  The  Economic  System  and  External  Economic  Relations 

11.  The  Annex  deals  together  with  these  two  subjects,  which  are  both  important 
for  Hong  Kong's  export-oriented  economy.  Hong  Kong's  prosperity  is  heavily 
dependent  on  securing  continued  access  to  its  principal  export  markets  in  the 
developed  world.  This  section  of  the  Annex  provides  reassurance  both  to  the 
community  at  large  in  Hong  Kong  and  to  its  trading  partners  that  the  basis  for 
Hong  Kong's  flourishing  tYee  market  economy  will  continue.  It  also  ensures 
that  Hong  Kong's  distinct  position  within  the  international  trading  community, 
on  the  basis  of  which  Hong  Kong  enjoys  its  present  rights  of  access,  will  continue. 

23.  The  Annex  provides  for: 

{a)  Hong  Kong's  right  to  continue  to  determine  its  economic  policies, 
including  trade  policy,  in  accordance  with  its  own  needs; 

[h)  the  continuation  of  the  free  enterprise  system,  the  free  trade  policies  and 
the  free  port,  which  are  the  essentials  of  Hong  Kong's  consistent  and 
successful  economic  policies; 

(c)  the  continuation  of  individual  rights  and  freedoms  in  economic  matters, 
notably  the  freedoms  of  choice  of  occupation,  of  travel  and  of  movement 
of  capital,  and  the  rights  of  individuals  and  companies  to  own  and 
dispose  of  property. 

38 


All  these  essential  requirements  are  met  in  this  section  of  the  Annex,  read  in 
conjunction  with  the  appropriate  paragraphs  of  section  XIII,  which  deals  with 
rights  and  freedoms.  The  right  of  the  future  Hong  Kong  SAR  to  decide  its  own 
economic  policies  is  an  essential  part  of  the  "one  country,  two  systems'"  concept. 

24.  Hong  Kong's  participation  in  the  General  Agreement  on  Tariffs  and  Trade 
(GATT),  through  which  it  enjoys  most  favoured  nation  treatment  in  its  major 
markets,  has  been  an  important  element  in  its  success  as  an  exporter.  Even  in 
textiles  and  clothing,  where  the  free  trade  principles  of  the  GATT  have  been 
modified  by  the  Multi-Fibre  Arrangement  (MFA)  which  is  a  negotiated 
derogation  from  the  normal  GATT  rules.  Hong  Kong  is  able  to  develop  its 
trade  within  the  MFA  and  the  bilateral  agreements  negotiated  under  its 
provisions.  What  is  even  more  important.  Hong  Kong  plays  an  active  role  in  the 
GATT  and  the  MFA.  The  continuation  of  Hong  Kong"s  participation  in  the 
GATT  and  the  MFA  (if  the  latter  is  extended  beyond  1986.  in  which  year  it 
expires)  is,  therefore,  of  prime  importance:  and  that  too  is  provided  in  this 
section  of  the  Annex. 

Section  VII:  The  Monetary  System 

25.  A  freely  convertible  currency  and  the  right  to  manage  the  Exchange  Fund, 
which  provides  the  backing  for  the  note  issue  and  is  used  to  regulate  the 
exchange  value  of  the  currency,  are  the  essential  elements  of  Hong  Kong's 
monetary  system.  This  section  of  the  Annex  clearly  stipulates  that  these 
essential  elements  shall  be  maintained. 

26.  This  section  of  the  Annex  also  provides  for  the  continuation  of  the  arrange- 
ments by  which  currency  is  issued  locally  by  designated  banks  under  statutory 
authority. 

27.  The  changes  to  the  designs  of  bank  notes  and  coins  provided  for  in  this 
section  are  a  logical  consequence  of  the  fact  that  Hong  Kong  will  become  a 
Special  Administrative  Region  of  the  People's  Republic  of  China  on  1  July 
1997. 

Section  VIII:  Shipping 

28.  A  major  factor  in  Hong  Kong's  trading  success  is  its  well-developed  deep 
water  port  and  the  capacity  to  handle  cargoes  by  up  to  date  methods.  Hong 
Kong's  position  as  a  major  shipping  centre  will  be  preserved  by  this  section  of 
the  Annex,  which  provides  that  systems  of  shipping  management  and  shipping 
regulation  will  continue.  Private  shipping  businesses  and  shipping-related 
businesses,  including  container  terminals,  may  continue  to  operate  freely. 

29.  The  Annex  states  that  the  Hong  Kong  SAR  will  have  its  own  shipping 
register  and  will  issue  certificates  in  the  name  of  "Hong  Kong.  China". 

30.  The  Annex  also  provides  that  merchant  shipping  will  have  free  access  to  the 
ports  of  Hong  Kong  under  the  laws  of  the  SAR. 

39 


Section  IX:  Civil  Aviation 

31.  This  section  of  the  Annex  makes  clear  that  Hong  Kong  will  continue  as  a 
major  centre  of  regional  and  international  air  services,  and  that  airlines  and  civil 
aviation  related  businesses  will  be  able  to  continue  operating. 

32.  Under  the  provisions  of  the  Annex  the  Central  People's  Government  of  the 
People's  Republic  of  China  will  negotiate  agreements  concerning  air  services 
from  and  to  other  points  in  China  through  the  Hong  Kong  SAR.  However  there 
is  also  a  provision  that  in  dealing  with  such  arrangements  the  Central  People's 
Government  will  consult  the  SAR  Government,  take  its  interests  into  account 
and  include  its  representatives  in  delegations  to  air  service  consultations  with 
foreign  governments.  By  virtue  of  section  XI  of  the  Annex,  which  deals  with 
external  relations,  such  representatives  may  also  be  included  in  delegations  to 
appropriate  international  organisations.  The  Central  People's  Government  will 
also  consult  the  Hong  Kong  SAR  Government  about  arrangements  for  air 
services  between  the  SAR  and  other  parts  of  China. 

33.  It  is  clearly  provided  that  all  scheduled  air  services  touching  the  Hong  Kong 
SAR  which  do  not  touch  the  mainland  of  China  will  be  regulated  by  separate 
arrangements  concluded  by  the  SAR  Government.  For  this  purpose  the  SAR 
Government  will  be  given  specific  authorisations  from  the  Central  People's 
Government  to  negotiate  with  foreign  states  and  regions  its  own  bilateral 
arrangements  regulating  air  services.  These  will  as  far  as  possible  maintain  the 
rights  previously  enjoyed  by  Hong  Kong.  The  SAR  Government  will  also  act 
under  a  general  authority  from  the  Central  People's  Government  in  negotiating 
all  matters  concerning  the  implementation  of  such  bilateral  arrangements  and 
will  issue  its  own  operating  permits  for  air  services  provided  under  these 
arrangements.  The  Annex  also  states  that  the  SAR  will  have  the  authority  to 
license  local  airlines,  to  keep  its  own  aircraft  register,  to  conduct  the  technical 
supervision  of  civil  aviation  and  to  manage  airports  in  the  SAR.  In  addition  the 
general  provisions  in  section  II  of  the  Annex,  which  deals  with  the  laws  of  the  SAR. 
provide  for  continuity  of  previously  existing  civil  aviation  laws  beyond  1997. 

34.  Hong  Kong's  civil  aviation  industry  will  thus  be  able  to  continue  to 
make  an  important  contribution  to  the  effective  functioning  of  Hong  Kong's 
economy  in  terms  of  servicing  the  needs  of  both  business  and  tourism. 

Section  X:  Culture  and  Education 

35.  This  section  of  the  Annex  makes  clear  that  Hong  Kong's  own  system  of 
education  will  be  continued  and  that  it  will  operate  separately  and  differently 
from  that  in  other  parts  of  China.  Although  most  of  the  funds  for  education  in 
Hong  Kong  are  provided  by  the  Government,  many  educational  institutes  were 
founded  and  are  run  by  community  and  religious  organisations.  Explicit 
provision  is  made  for  this  system  to  be  maintained. 

36.  This  section  also  provides  for  continuity  in  the  application  of  present 
educational  standards,  in  the  use  of  teaching  materials  from  overseas  and  in  the 

40 


freedom  to  pursue  education  outside  Hong  Kong.  It  therefore  provides  a  sound 
basis  for  Hong  Kong  to  continue  to  develop  an  educational  system  which  will 
ensure  that  the  population  will  have  the  skills  and  expertise  required  to  enable 
Hong  Kong  to  maintain  and  improve  its  position  in  the  fiercely  competitive 
economic  and  trading  environment  within  which  Hong  Kong  operates. 

37.  Hong  Kong  has  come  to  enjoy  a  varied  cultural  and  intellectual  life.  This 
and  other  sections  of  the  Annex  provide  for  the  present  unique  mix  of  cultural 
and  intellectual  influences  to  continue.  Provision  is  made  in  section  XI  of  the 
Annex,  which  deals  with  external  relations,  for  Hong  Kong  to  continue  to 
participate  in  international  sporting  events. 

Section  XI:  External  Relations 

38.  This  section  of  the  Annex  provides  that,  subject  to  the  principle  that  foreign 
affairs  are  the  responsibility  of  the  Central  People's  Government,  the  Hong 
Kong  SAR  will  manage  on  its  own  certain  aspects  of  its  external  relations,  in 
particular  those  in  the  economic  field.  This  is  particularly  important,  since 
Hong  Kong's  access  to  its  principal  overseas  markets  in  the  industrialised 
world,  which  is  crucial  to  Hong  Kong's  industry,  depends  upon  recognition  of 
the  separate  nature  of  these  interests. 

39.  In  keeping  with  the  general  provisions  for  Hong  Kong  to  be  a  Special 
Administrative  Region  under  Chinese  sovereignty,  overall  responsibility  for 
foreign  affairs  will  lie  with  the  Central  People's  Government,  just  as  overall 
responsibility  for  these  matters  at  present  lies  with  Her  Majesty's  Government 
in  the  United  Kingdom.  At  the  same  time  the  Hong  Kong  SAR  will  be  able, 
under  the  provisions  of  this  section  of  the  Annex,  to  look  after  its  own  particular 
interests  in  certain  areas  by  virtue  of  the  power  to  be  given  to  it  to  conclude 
agreements  in  appropriate  fields  and  to  be  represented  in  the  delegation  of 
the  People's  Republic  of  China  at  negotiations  of  direct  concern  to  Hong  Kong. 

40.  The  detailed  method  by  which  the  provisions  of  the  second  paragraph  of 
this  section  of  the  Annex,  which  deals  with  the  application  to  the  Hong  Kong 
S.'^R  of  international  agreements,  will  be  implemented  will  have  to  be  worked 
out  during  the  transitional  period  and  will  be  one  of  the  matters  to  be  considered 
by  the  Joint  Liaison  Group.  There  is  a  very  large  number  of  international 
agreements  which  apply  to  Hong  Kong  and  whose  continued  application 
following  the  establishment  of  the  Hong  Kong  SAR  will  need  to  be  secured. 
This  will  require  consultation  with  third  countries. 

41.  The  Annex  provides  for  continuity  of  representation  by  all  foreign  states 
and  organisations  currently  represented  in  Hong  Kong,  subject  to  the  approval 
of  the  Central  People's  Government.  Changes  to  the  status  of  such  missions 
may  be  required  in  order  to  take  account  of  the  existence  or  otherwise  of 
formal  relations  between  the  People's  Republic  of  China  and  a  particular  state. 
The  United  Kingdom  will  be  represented  in  Hong  Kong  bv  a  Consul-General 
after  1  July  1997. 

41 


Section  XII:  Defence.  Security  and  Public  Order 

42.  With  the  estabhshmcnt  of  the  Hong  Kong  SAR.  the  British  garrison  will  be 
withdrawn  and  the  Central  People's  Government  of  the  People's  Republic  of 
China  will  be  responsible  for  the  SAR's  defence.  This  section  of  the  Annex 
makes  clear  that  the  maintenance  of  public  order  in  the  SAR  will  be  the  SAR 
Government's  responsibility.  It  is  also  stated  that  military  forces  sent  by  the 
Central  People's  Government  to  be  stationed  in  the  SAR  for  the  purpose  of 
defence  will  not  interfere  in  its  internal  affairs,  and  that  expenditure  for  these 
military  forces  will  be  borne  by  the  Central  People's  Government. 

Section  XIII:  Rights  and  Freedoms 

43.  This  section  of  the  Annex  explains  that  basic  rights  and  freedoms  will  be 
protected  in  the  Hong  Kong  SAR.  It  covers  this  important  subject  without  an 
extended  description  of  the  rights  and  freedoms  concerned  by  providing: 

{a)  that  the  rights  and  freedoms  previously  enjoyed  under  the  laws  of  Hong 
Kong  will  be  maintained  by  the  SAR  Government;  and 

{b)  that  the  provisions  of  the  International  Covenants  on  Civil  and  Political 
Rights  and  on  Economic.  Social  and  Cultural  Rights,  as  they  apply  to 
Hong  Kong,  will  continue  to  apply  to  the  Hong  Kong  SAR. 

44.  It  is  thus  made  clear  that  persons  in  the  Hong  Kong  SAR  will  enjoy  the 
same  protection  of  the  law  against  infringements  of  their  basic  rights  as  they  did 
before  the  establishment  of  the  SAR. 

45.  While  not  restricting  the  range  of  rights  and  freedoms  the  text  mentions 
specifically  some  of  the  more  important  rights  and  freedoms  presently  enjoyed 
under  the  law. 

46.  The  Covenants  are  too  lengthy  to  reproduce  here  but  they  are  public 
documents ^  They  apply  to  Hong  Kong,  with  certain  reservations,  and.  in 
accordance  with  this  section  of  the  Annex,  will  continue  to  do  so  after  30  June 
1997.  The  Covenants  were  drafted  by  the  United  Nations  Human  Rights 
Commission  and  adopted  by  the  United  Nations  General  Assembly,  and 
entered  into  force  in  1976.  They  state  a  general  consensus  of  nations  on  basic 
rights  and  identify  in  detail  specific  human  rights  and  freedoms:  including  the 
right  to  work,  to  an  adequate  standard  of  living,  to  life  and  liberty,  and  freedom 
of  expression,  conscience,  religion  and  association. 

47.  The  reservations  entered  by  the  United  Kingdom  in  respect  of  the 
application  of  the  Covenants  to  Hong  Kong,  which  are  also  public,  took 
account  of  the  realities  of  the  social  and  economic  conditions  in  Hong  Kong:  for 
example,  in  relation  to  Hong  Kong  the  United  Kingdom  made  reservations 
relating  to  immigration  and  to  the  deportation  of  aliens. 

'  Command  6702  Treaty  Series  No.  6  (1977) 

42 


Section  XIV:  Right  of  Abode,  Travel  Documents  and  Immigration 

48.  This  section  concerns  the  right  of  abode  in  the  Hong  Kong  SAR,  the  travel 
documents  to  be  used  by  residents  of  the  SAR,  and  immigration  matters.  It 
provides  for  a  high  degree  of  continuity  in  these  areas  consistent  with  the  change 
in  Hong  Kong's  status  on  1  July  1997. 

49.  The  first  paragraph  defines  the  categories  of  people  who  will  have  the  right 
of  abode  (including  the  right  to  enter,  re-enter,  live  and  work)  in  the  Hong  Kong 
SAR.  These  include: 

{a)    Chinese  nationals  who  were  born  in  Hong  Kong  or  have  lived  there 

continuously  for  at  least  7  years; 
{b)    Chinese  nationals  born  outside  Hong  Kong  to  Chinese  nationals  who 

have  the  right  of  abode  in  Hong  Kong; 
(c)    all  non-Chinese  nationals  who  have  lived  in  Hong  Kong  continuously 

for  at  least  7  years  and  who  have  taken  it  as  their  place  of  permanent 

residence;  and 
{d)   any  others  who  had  the  right  of  abode  only  in  Hong  Kong  before  1  July 

1997. 

Non-Chinese  nationals  born  in  Hong  Kong  to  parents  who  have  the  right  of 
abode  there  also  have  the  right  of  abode  but  will  retain  it  after  the  age  of  21  only 
if  they  have  met  the  requirements  of  seven  years'  residence  and  of  taking  Hong 
Kong  as  their  place  of  permanent  residence.  The  SAR  Government  will  issue 
permanent  identity  cards  to  all  those  with  the  right  of  abode  in  the  SAR.  These 
cards  will  state  the  holder's  right  of  abode. 

50.  This  section  of  the  Annex  states  that  Chinese  nationals  who  have  the 
right  of  abode  in  the  Hong  Kong  SAR  will  be  eligible  for  passports  issued 
by  the  SAR  Government.  Other  persons  who  have  the  right  of  abode,  or 
are  otherwise  lawfully  resident,  in  the  SAR  will  be  eligible  for  other  travel 
documents  issued  by  the  SAR  Government.  Both  these  categories  of  persons 
may  also  use  travel  documents  issued  by  the  competent  authorities  of  the 
People's  Republic  of  China  or  by  other  governments  to  travel  to  and  from 
the  SAR:  these  include  passports  issued  by  the  United  Kingdom  (see  para- 
graphs 63  to  64  below). 

51.  The  Annex  makes  clear  that  the  right  to  leave  the  Hong  Kong  SAR  for  any 
purpose,  e.g.  business,  study  or  emigration,  will  be  maintained  subject  to  the 
normal  exceptions  under  the  law.  To  facilitate  entry  by  SAR  residents  into  third 
countries,  all  travel  documents  issued  to  them  will  either  include  a  reference  to 
their  right  to  return  to  the  SAR  or  refer  to  the  fact  that  they  hold  a  permanent 
identity  card  as  evidence  of  their  right  of  abode  in  the  SAR.  The  SAR  Govern- 
ment will  be  assisted  or  authorised  by  the  Central  People's  Government  to 
conclude  agreements  with  states  or  regions  which  provide  for  the  mutual 
abolition  of  visa  requirements. 

43 


Annex  II:  Terms  of  Reference  of  the  Sino-British  Joint  Liaison  Croup 

52.  As  the  Secretary  of  State  for  Foreign  and  Commonwealth  Affairs  em- 
phasised in  his  press  conference  in  Hong  Kong  on  1  August  1984.  it  is  fully 
agreed  between  Her  Majesty's  Government  and  the  Chinese  Government  that 
Her  Majesty's  Government  will  remain  responsible  for  the  administration  of 
Hong  Kong  until  30  June  1997.  Nonetheless  there  will,  of  course,  be  a  number 
of  areas  relating  to  the  implementation  of  the  Joint  Declaration  where  further 
consultation  between  the  two  Governments  will  be  required  after  the  Joint 
Declaration  has  entered  into  force.  One  obvious  example  in  the  future  is 
the  arrangements  for  Hong  Kong's  continued  participation  in  international 
agreements  and  organisations.  Such  consultation  will  be  facilitated  by  the 
Sino-Brilish  Joint  Liaison  Group,  whose  role  and  functions  are  clearly  defined 
in  Annex  H. 

Annex  III:  Land  Leases 

53.  This  Annex  takes  account  of  the  important  part  which  land  plays  in  the 
development  and  economy  of  Hong  Kong. 

54.  It  considers  existing  leases  under  two  main  categories:  those  which  continue 
beyond  30  June  1997  and  those  which  expire  before  that  date.  In  the  case  of  the 
first  category  (mainly  75  year  leases  renewable  for  75  years,  and  999  year  leases) 
the  rights  in  the  leases  are  recognised  by  the  Annex  and  will  be  recognised  and 
protected  under  the  lav/  of  the  SAR  after  1997.  These  rights  include  the  right  of 
renewal  in  the  case  of  renewable  leases,  as  well  as  rights  granted  by  the 
leaseholder  to  other  persons,  e.g.  sub-leases,  mortgages  and  rights  of  way. 

55.  Leases  which  expire  before  30  June  1997  (mainly  New  Territories  leases  and 
75  year  non-renewable  leases  in  the  urban  area)  may  be  extended  without 
premium  until  2047.  A  rent  of  3  per  cent  of  current  rateable  value  will  be  charged 
from  the  date  of  extension,  e.xcept  in  the  case  of  village  land  held  by  indigenous 
villagers  who  will  continue  to  pay  a  nominal  rent. 

56.  New  leases  running  until  2047  may  be  issued  by  the  Hong  Kong  Govern- 
ment in  the  period  up  to  30  June  1997.  These  will  continue  to  be  issued  under  the 
existing  system  of  land  disposal  (i.e.  by  public  auction,  tender  or  private  treaty 
grant).  A  premium  will  be  payable  and  a  nominal  rent  will  be  charged  up  to  30 
June  1997.  After  that  date,  no  additional  premium  will  be  payable  but  the  rent 
will  increase  to  3  per  cent  of  current  rateable  value. 

57.  The  concept  of  charging  a  rent  on  the  basis  of  rateable  values  follows  that 
used  since  1973  to  fix  rents  on  the  renewal  of  leases.  It  has,  however,  been  agreed 
that  the  rent  will  be  based  on  current  rateable  values  (i.e.  a  rent  which  will 
change  as  rateable  values  change)  rather  than  based,  as  at  present,  on  a  fi.xed 
reference  point  (i.e.  a  rent  which  is  based  on  the  rateable  value  at  the  date  of 
renewal  and  w  hich  remains  unchanged  for  the  w  hole  term  of  the  lease). 

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58.  The  amount  of  new  land  which  may  be  granted  by  the  Hong  Kong  Govern- 
ment will  be  limited  to  50  hectares  a  year.  The  limit  does  not  include  land 
granted  to  the  Housing  Authority  for  the  construction  of  public  rental  housing. 

59.  Modifications  of  lease  conditions  will  continue  to  be  dealt  with  by  the  Hong 
Kong  Government  in  accordance  with  existing  practice. 

60.  In  recognition  of  the  fact  that  leases  which  extend  beyond  June  1997  derive 
part  of  their  value  from  the  post-June  1997  portion  of  their  term,  the  Annex 
provides  for  net  premium  income  to  be  shared  between  the  Hong  Kong 
Government  and  the  future  SAR  Government. 

61.  A  Land  Commission,  consisting  of  an  equal  number  of  officials  appointed 
by  Her  Majesty's  Government  and  the  Chinese  Government,  will  be  set  up.  This 
Commission  will  monitor  the  implementation  of  the  provisions  in  this  Annex 
and  will  consider  proposals  for  increasing  the  limit  on  the  amount  of  new- 
land  which  may  be  granted  and  for  drawing  on  the  SAR  Government's  share 
of  premium  income.  It  will  not,  however,  consider  individual  land  cases,  nor 
will  it  be  involved  in  deciding  who  should  be  issued  with  new  leases.  The 
Commission  will  be  dissolved  on  30  June  1997. 

Associated  Exchange  of  Memoranda 

62.  The  status  after  30  June  1997  of  persons  who  are  now  British  Dependent 
Territories  citizens,  and  related  issues,  are  covered  in  two  Memoranda  to  be 
formally  exchanged  between  the  British  and  Chinese  Governments  on  the 
same  day  as  the  signature  of  the  Joint  Declaration.  These  Memoranda  set  out 
the  respective  positions  of  the  two  Governments. 

63.  Since  Hong  Kong  will  no  longer  be  a  British  dependent  territory  after 
30  June  1997,  it  will  not  be  appropriate  for  those  who  are  British  Depend- 
ent Territories  citizens  by  virtue  of  a  connection  with  Hong  Kong  to  be 
described  as  such  after  that  date.  The  United  Kingdom  Government  will  seek 
Parliamentary  approval  for  legislation  which  will  give  such  British  Dependent 
Territories  citizens  the  right  to  a  new  status,  with  an  appropriate  title. 
This  status  will  not  give  them  the  right  of  abode  in  the  United  Kingdom, 
which  they  do  not  possess  at  present,  but  it  will  carry  benefits  similar  to 
those  enjoyed  by  British  Dependent  Territories  citizens  at  present,  including 
the  entitlement  to  use  British  passports  and  to  receive  British  consular  ser- 
vices and  protection  in  third  countries.  The  status  will  not.  howe\er.  be 
transmissible  by  descent.  The  United  Kingdom  Government  will  do  all  they 
can  to  secure  for  holders  of  these  British  passports  the  same  access  to  other 
countries  as  that  enjoyed  at  present  by  holders  of  British  Dependent  Terri- 
tories citizen  passports. 

64.  This  new  status  will  be  acquired  by  former  Hong  Kong  British  Dependent 
Territories  citizens  only  if  they  obtain  a  British  passport  before  1  July  1997. 
The  only  exceptions  to  this  are: 

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(a)  persons  included  in  the  passport  of  a  parent  before  1  July  1997  will  be 
able  to  acquire  this  new  status  and  will  be  able  to  obtain  a  British 
passport  of  their  own  after  that  date; 

(b)  persons  who  were  born  between  1  January  and  30  June  1997  will  be  able 
to  acquire  this  new  status  if  they  obtain  a  British  passport,  or  are 
included  in  the  passport  of  a  parent,  on  or  before  31  December  1997. 
Those  who  are  included  in  the  passport  of  a  parent  will  be  able  to  obtain 
a  British  passport  of  their  own  after  that  date. 

65.  The  Chinese  Memorandum  states  the  Chinese  Government's  position  that 
Hong  Kong  Chinese  are  Chinese  nationals.  It  indicates,  however,  that  those 
Chinese  nationals  who  hold  British  travel  documents  may  continue  to  use  them 
after  1  July  1997.  Such  persons  will  not.  of  course,  be  entitled  to  consular 
protection  by  the  United  Kingdom  Government  in  the  Hong  Kong  SAR  or  in 
other  parts  of  China. 


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Printed  by  the  Government  Printer,  Hong  Kong